MOSCOW (MRC) -- Saudi Aramco, the world’s largest oil producer, is in early talks with banks for a loan of about USD10 billion to help finance its acquisition of a 70% stake in Saudi Basic Industries Corp (SABIC), reported Reuters with reference to three banking sources.
Aramco agreed last year to buy the controlling stake in SABIC from the kingdom’s wealth fund for $69.1 billion, sealing one of the biggest-ever deals in the global chemical industry.
"The financing would be for the SABIC deal, but the borrower is Aramco," said one of the sources, adding that the discussions were at an initial stage, with the company sounding out banks.
"Ten billion dollars is where they want to get to, (it’s) not clear if, in this market, they’ll manage to reach that."
A second source said banks involved in the talks included HSBC and JPMorgan, as well as lenders in the Gulf.
In response to a Reuters request for comment about whether it was seeking such a loan, Saudi Aramco said: "The company continues to review its financial options as part of its normal course of business, while prudently preserving its pristine balance sheet and its resilience."
JPMorgan declined to comment, while HSBC did not immediately respond to a request for comment.
A third banker said Aramco was looking to borrow in US dollars because it was cheaper than in Saudi riyals, in terms of interest, and to avoid pressuring Saudi banks’ liquidity.
The SABIC stake acquisition from Saudi Arabia’s Public Investment Fund (PIF) will help Aramco’s downstream expansion plans. The deal came after months of talks between the company and PIF and was one of the reasons for the delay of Aramco’s blockbuster initial public offering late last year.
The loan discussions come at a time when oil-producing nations have been hit by a plunge in demand for crude as a result of the coronavirus outbreak and a slide in oil prices.
OPEC and its allies led by Russia, a group known as OPEC+, have agreed to the largest oil output cut in history that could curb supply by up to 20%. But the agreement has done little to boost oil prices as many economies remain under lockdown due to the novel coronavirus pandemic, curbing demand.
Saudi Arabia, which owns more than 98% of the oil giant, is likely to sell new international bonds soon, according to sources, as the output cut deal further squeezes revenues hit by the plunge in oil prices.
We remind that as MRC informed before, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.
Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
Saudi Basic Industries Corporation (SABIC) ranks among the world's top petrochemical companies. The company is among the worldпїЅs market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
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