Saudi Aramco plans to create a standalone gas division as it expands domestic natural gas production and its global LNG portfolio, with a potential minority listing among options under consideration, sources told Reuters.
(Reuters) – Saudi oil giant Aramco plans to reorganize its business to create a new gas division with an eye on possible listings of business units in the future to raise cash, two sources with knowledge of the matter told Reuters.
The move is in line with an existing strategy at Gulf state oil companies of offering outside investors pieces of their businesses while retaining operational control and largely avoiding opening up their main oil-producing divisions.
Such deals have included the United Arab Emirates’ state oil company ADNOC listing stakes in gas, drilling and retail fuel businesses. Aramco is publicly listed but also has listed subsidiaries such as petrochemicals giant SABIC. Both ADNOC and Aramco have also raised billions of dollars from infrastructure assets such as oil and gas pipelines.
Aramco declined to comment.
The new gas business would allow Aramco to use a focused platform from which to develop its natural gas resources domestically and build a liquefied natural gas (LNG) portfolio abroad.
Aramco, long the engine of the economy in the world’s largest crude exporter before the U.S.-Israeli war on Iran disrupted its main export routes, has been seeking outside capital in its efforts to support the kingdom’s drive to reduce its reliance on oil.
Gas arm to stand alongside upstream and downstream divisions
The reorganization would move Aramco from two main business segments—upstream and downstream—to three, with each unit having its own president, one of the sources said, adding that the company was also exploring other ways to raise cash, including lease-and-leaseback agreements.
Gulf state oil companies have used such deals to lease certain assets to an investor group for an upfront payment and then lease it back, maintaining operational control while paying usage fees over an agreed number of years.
Aramco is also exploring a potential listing of a minority stake in the gas business as one option to raise cash, the second source said, pointing to Aramco’s minority listing on the Saudi Exchange in 2019 as a model.
Jafurah at the heart of Aramco’s domestic gas business
The crown jewel of Aramco’s domestic gas business is Jafurah, an unconventional field that is potentially the biggest shale gas project outside the United States.
Jafurah, which began operating last year, was envisioned displacing oil used for power generation with natural gas, freeing more crude oil for export.
Aramco has said its unconventional gas program, in which Jafurah is key, at peak production is expected to generate electricity equivalent to displacing 500,000 barrels per day of crude.
Aramco last year raised $11 billion from a lease and leaseback agreement of its Jafurah gas processing facilities with a consortium led by Global Infrastructure Partners, part of BlackRock.
