| 摘要 | In August 2018, Saudi Aramco announced that it would merge with Saudi Arabian Basic Industries Company (SABIC) by purchasing 70 percent of the company from the Public Investment Fund (PIF) of Saudi Arabia, the kingdom’s sovereign wealth fund (SWF). On March 27, 2019, Aramco, Saudi Arabia’s state-owned oil company, signed a formal agreement that stated a purchase price of $69.1 billion. Aramco has, meanwhile, ramped up its efforts to privatize through an initial private offering (IPO). If Aramco is to join the ranks of publicly traded international oil companies (IOCs), it must be transparently managed and must diversify in order to resemble other IOCs in word and deed. Aramco has made great strides towards transparency through the release of a prospectus for investors in April 2019. Its acquisition of SABIC, a highly respected chemical company, represents a move towards diversification. $This issue brief studies SABIC’s importance to energy
and chemical businesses worldwide, and it raises questions about whether the
merger with Aramco will require a substantial reorganization of SABIC—along
with accompanying concerns about both the workforce and jobs. It also examines
Aramco’s inner workings and explains why its acquisition of SABIC serves
Aramco’s efforts to integrate upstream and downstream companies in the energy
sector. Finally, it analyses the relationship between Aramco and SABIC, and
what the merger’s implications will be for the intricate relationship between
the various bureaucracies and the leadership in Saudi Arabia. $This analysis was conducted before the massive attack on September 14, 2019, on Aramco’s oil-processing facilities at Abqaiq. The damage from the attack cut Aramco’s production capacity by two to three million barrels/day (b/d). The attack occurred almost two weeks after a series of decrees issued by Saudi Crown Prince Mohammad bin Salman (MBS) removing Saudi Energy, Industry, and Mineral Resources Minister Khalid Al-Falih from his position at the head of the ministry, as well as from the board and chairmanship of Aramco. Al-Falih was replaced by PIF Chief Executive Officer (CEO) Yasir Al-Rumayyan. In spite of these significant events, the new leaderships at Aramco and the ministry are proceeding with the IPO of Aramco, although it is likely that some delay will be incurred. On the other hand, these developments should not directly affect the Aramco-SABIC merger. However, the shifts in leadership will have lasting implications for Aramco’s future strategy and direction, and they throw the tensions between Saudi technocrats and MBS into sharp relief, highlighting the importance of understanding the dynamics between SABIC, Aramco, and the PIF.$Return to table of contents$SABIC was established by royal decree in 1976 and its aim was to help diversify Saudi Arabia’s dependence on crude oil. At the time, natural gas produced in the kingdom was associated with the extraction of crude oil and, in fact, was an impediment to oil exports, since natural gas must be removed before oil can be shipped. Most of it was flared on the spot. The kingdom soon realized that the natural gas should be collected and used to provide industrial opportunities as well as benefit citizens by providing low-cost electricity and desalinated seawater. SABIC was tasked with using natural gas to produce chemicals, thus adding value to the kingdom’s main basic product: crude oil. In 2018, SABIC had total sales of $45 billion, with a net profit of $8.5 billion on total assets of $85 billion and equity of $59 billion. In just over forty years, SABIC has become the world’s fourth-largest chemical company in terms of sales.$There has been a division of labor in the kingdom’s
chemical industry between Aramco and SABIC. Aramco mostly produces chemicals
from the liquid products obtained from crude oil, mainly naphtha, which are then
transformed by Aramco’s joint ventures—Sadara Chemical Company and Petro Rabigh.
For its part, SABIC processes the various gases—mainly methane, ethane, propane,
and butane—into hundreds of chemicals, including fertilizers.$SABIC is organized into four business
divisions: petrochemicals, agri-nutrients, metals, and specialty chemicals.
Each division manages SABIC’s interests in the 123 joint ventures it has
established both in the kingdom and overseas.
$At the time it was established, SABIC had no
homegrown knowledge of chemical manufacturing and so it developed chemical
production lines in joint ventures with foreign partners. SABIC became a
holding company for numerous plants to make products for export that were marketed
by their venture partners. SABIC uses the methane in natural gas to make
methanol and ammonia, which is then transformed into urea. This turned the kingdom
into a major exporter of fertilizers. SABIC also uses ethane and propane to produce
a number of chemical products including MEG, glycols, polymers like HDPE, LDPE,
LLDPE, polypropylene polycarbonates, etc. It built a 5-million-tons/year (t/y) steel
industry using German technology for direct reduction of iron ore into steel
using methane. $Eventually, SABIC developed a number of
research centers. It has become mostly independent of foreign venture partners,
bringing its own products and technology to world markets and registering
thousands of patents for its own technology. SABIC continued its expansion within
the kingdom, but also abroad, buying substantial production lines from
international companies. It became the largest producer of ethylene in Europe
with plants in Germany, the Netherlands, and Ireland. The company, which based
all its productions in the kingdom on the supply of natural gas from Aramco at
prices well below world markets, became a chemical company like all the others
in Europe and the United States, which use natural gas and crude oil-based
liquids like naphtha bought locally at world prices. Aramco only recently
started growing its liquids-based chemicals; SABIC mastered these skills over
the past twenty years in European and Asian markets.$Perhaps the most striking part of SABIC’s evolution was its approximately $11.6-billion purchase of General Electric Co.’s GE Plastics business in 2007. This purchase turned SABIC into a household name in the chemical industry. GE’s advanced chemicals were mainly used by the automobile industry worldwide. The purchase provided SABIC with advanced research and plants in thirty-five countries, and put the company on par with the world’s biggest players, like BASF. SABIC now runs thirty-nine plants alone or in joint ventures and has a substantial presence in seventy-two countries; 85 percent of its sales are abroad, of which 39 percent are in Asia and 23 percent in Europe. $Within Saudi Arabia, SABIC developed ventures with local companies. For example, it partnered with Ma’aden, a mining company, to develop a world-class phosphate industry to produce the high-value fertilizer Diammonium Phosphate (DAP), which is made from phosphoric acid and ammonia. Ma’aden provides the phosphoric acid, which is made through reactions between sulfuric acid and rock phosphate, while SABIC manufactures ammonia. Thus, in the joint venture with Ma’aden, SABIC is part producer of high-value DAP, one of the largest in the world. It is worth noting that Aramco is involved in the entire production chain. Aramco provides the sulfur that is used by Ma’aden to produce sulfuric acid and the methane used by SABIC to produce ammonia. $Another development for SABIC is its joint venture with Aramco to research, build, and operate a crude-oil-to-chemicals (COTC) production line, one of the world’s first. Aramco is already developing portions of the technology in joint ventures with various foreign partners like Technip, Axens, and Chicago Bridge & Iron Company. The $20-billion venture, to be based in Yanbu on the Red Sea, will process 400,000 b/d of oil to produce about 9 million t/y of chemicals. This process would allow Aramco to bypass refining to transform crude oil directly into various chemicals, which will greatly increase the value added to each barrel of oil.$As part of the merger, SABIC will be able to
bring to the deal its de facto control of Saudi Kayan, a Saudi chemical company.
Saudi Kayan produces some of the most advanced and high-value chemicals in the
SABIC group.$SABIC has a reputation of being a savvy borrower and issuer of both debt and equity. The company has always been popular with Saudi investors. Today, the Saudi public owns 30 percent of its shares through the Tadawul stock exchange in Riyadh. SABIC has always been able to pay generous dividends of 20 percent of the par value of the shares, which is the price most shareholders paid to acquire them at flotation, making the company one of the most coveted by the kingdom’s investors. The PIF holds the balance of the shares: 70 percent. SABIC has issued three billion shares, which are trading in a narrow range at about $32.5 a share, for a capitalization of about $98 billion. At today’s market value, the PIF’s share of the company amounts to close to $70 billion, close to the value which Aramco agreed to pay for the PIF’s stake.$Notwithstanding SABIC’s activities in fertilizers and metals, it is still mainly a chemical company. In 2018, chemicals and specialty chemicals represented about 88 percent of its sales and 93 percent of total profits, while fertilizers represented less than 3 percent of its sales and 5 percent of profits, and metals were 6 percent of its sales, but lost money. $However large and profitable SABIC may be, it pales in comparison to Aramco, which in 2018 had $355.94 billion in sales and $111.071 billion in net income after taxes and royalties paid to the state. Aramco is very profitable in that its cost of production is reputed to be less than $6/barrel on sales at above $60/b presently, while SABIC’s profits, considered in the industry to be quite competitive, are at 15 percent of sales. SABIC, like most chemical companies, has high costs of labor and feedstock. $Return to table of contents$In January 2016, long before the announcement of Aramco’s merger with SABIC, MBS declared that Aramco would be privatized with a goal of issuing 5 percent of its equity to the public to raise $100 billion. The funds would be earmarked for transfer to the PIF to use in its investment strategy of buying high-tech, non-oil related firms locally and overseas to diversify the Saudi economy. The privatization effort turned out to be much more complicated than expected, as the financial markets insisted that Aramco provide full disclosure of all its activities, assets, liabilities, profits, and losses, a mammoth task for a company with sales of over $355 billion, numerous joint ventures, and without any previously published data. $Part of the conundrum for Aramco was the necessity to disclose how much the company gives the state to fund the national budget. In 2017, Aramco announced that it would pay the state 50 percent of its net profits. This was lower than the previously estimated 85 percent of profits and more in line with payments made by other national oil companies. On the other hand, Aramco disclosed that it would also pay a royalty of 20 percent of oil sales to the state for the use of the oil fields. This arrangement kept its contribution to the state fairly even, but now fully known to the world markets.$Until the spring of 2019, financiers and the financial press had raised concerns about lending to or buying shares of Aramco because of the company’s lack of transparency even beyond the funds it was providing to the state. In order to issue publicly traded bonds or sell equity shares on the world’s financial markets, Aramco would have to provide independently audited financial statements of its extensive operations and audited disclosures of the oil resources to which it has access. On April 1, 2019, the company eventually issued a 450-page prospectus for the issuance of the “Global Medium Term Note Programme.” This prospectus provides investors with audited statements on financial results and on oil reserves and goes a long way towards satisfying investors.$Return to table of contents$Aramco’s stated intent to expand into natural gas is also part of a strategy to become an IOC-like company, albeit the largest IOC in the world. BP, Total, Shell, and even ExxonMobil describe themselves as energy companies, while in the past they were merely “oil companies.” These companies, as well as Aramco, view natural gas as the most important fuel of the near future. IOCs have seen the writing on the wall and know that, in the long term, renewable energy will dominate. But before this happens at a scale large enough to displace fossil fuels and oil, in particular, natural gas will provide a cleaner source of energy to bridge energy demand from coal into renewables. Natural gas is also a primary feedstock for the chemical industry. Most of the ethylene and propylene production in the United States and Russia comes from natural gas. SABIC’s production in Saudi Arabia is 100 percent based on natural gas. Saudi Arabia is rich in gas, but not rich enough to be an international player. To remain the dominant player in the hydrocarbon business, Aramco needs to become as dominant in gas as it is today in crude oil and petroleum products. Only then can it be compared favorably to ExxonMobil, Chevron, Shell, Total, or BP. Al-Falih, the former minister, announced at the Atlantic Council Global Energy Forum in Abu Dhabi in January 2019 that Aramco would pursue a strategy to become more international in the natural gas industry worldwide. This was reiterated by Aramco’s CFO Khalid Al-Dabbagh in August 2019. This is an important change to the kingdom’s energy policy, as until now Aramco had not been involved upstream outside the kingdom.$As Aramco seeks greater diversification, there
is a business logic in its wanting to benefit from SABIC’s experience and technologies
in chemicals. The merger announcement also comes at a time when Aramco is
greatly expanding its own chemical and refining downstream operations.$Aramco’s merger with SABIC fits with a strategy to make the Saudi oil giant like most other large international oil companies, except much bigger. Indeed, all IOCs have a very large presence in the downstream as well as the upstream and increasingly seek to become dominant in the natural gas business and in the downstream thereof. SABIC will provide Aramco a major boost in its presence in the chemical industry in Saudi Arabia and worldwide. As stated by Al-Falih, Aramco is following a strategy to expand overseas, get into the natural gas market—both shale-based and traditional, and extensively grow its downstream chemical business at home and abroad. This strategy ultimately would allow Aramco to be viewed by the markets as being comparable to—or even more significant than—ExxonMobil and would allow it to be valued at the same multiple of earnings as most other IOCs in the world. For example, ExxonMobil, which is the largest of the IOCs involved in upstream, downstream (refining and chemical processing), and all the way to distribution, sees its shares valued on average at a P/E—price-to-earnings ratio, otherwise called a “multiple”—per share of about twenty-four.$Today, in the upstream, Aramco operates the largest oil fields in the world and is the largest producer of crude oil. It has the ninth-largest reserves and eighth-largest production of natural gas, much of it associated with its crude oil production. However, it does not export or import any gas, nor does it use large volumes of gas for downstream production activities. Until now, the natural gas produced has been gathered and processed in large plants and then sold to utility companies for water desalination and electricity production, or to a lesser extent to SABIC for transformation into chemicals and fertilizers. $In the downstream, Aramco is the fourth-largest refiner in the world, with a stated intent to increase its capacity to 10 million barrels per day (b/d) from 4.9 million b/d. Aramco has important investments in chemicals, but it is still relatively small in this segment which it owns in joint ventures with foreign companies that are fully responsible for design, operations, and marketing. Hence, the addition of SABIC will make Aramco a major player not only in the kingdom, but worldwide based on Saudi management and technology.$Aramco joining the same league as the world’s largest IOCs will require hundreds of billions of dollars to diversify and expand the company worldwide. Thus, it appears Aramco would have to use internally any funds raised by the IPO. When first announced by MBS in 2016, the crown prince valued Aramco at $2 trillion, and thus the 5 percent to be sold to the public at $100 billion. This amount, at the time, was expected to be paid to the PIF to fund a portion of its $400-billion planned expansion in non-oil related industries, in line with its purview to diversify the kingdom’s assets. However, as the IPO is taking a great deal longer than expected, the Saudi leadership may have considered the sale of some of its existing holdings as an effective way for the PIF to rapidly raise funds.$The PIF’s largest investment is the ownership of 70 percent of SABIC, a stake valued at close to $70 billion on the Tadawul stock market in Riyadh. The merger also offers benefits to Aramco as it provides it with a quick expansion of its chemical business, which it is seeking to develop as part of its downstream strategy. However, at the time of the announcement it was not quite clear how Aramco would finance the transaction. Aramco decided to borrow substantial funds in international financial markets prior to the IPO, announcing in January 2019 that it would borrow between $10 billion and $12 billion to finance its immediate requirements for the acquisition of the PIF’s stake in SABIC. In April 2019, Aramco released the aforementioned prospectus to sell short- and medium-term bonds to be floated on the world markets. However, the memorandum did not specify that the bonds are issued for the SABIC acquisition per se. Instead, it said they were issued for “general corporate purpose,” leaving the door open for Aramco to use it for its own investment plans. In any event, the $12 billion raised by this bond offering would only cover one-seventh of the amount needed to acquire SABIC. $Return to table of contents$SABIC is a chemical company, while Aramco is mainly
an oil company. As discussed earlier, Aramco is increasing its presence in
advanced chemicals, mainly through its newly opened $20-billion investment, Sadara
Chemical Company, a joint venture with DowDuPont. Undoubtedly, Sadara Chemical
Company is already contributing a great deal to Aramco’s balance sheet, and many
of the chemicals it is producing, such as urethanes, are extremely advanced and
different from those produced by SABIC. Many of the chemicals, such as amines,
polycarbonates, and glycol, are as advanced as the specialty chemicals produced
by Saudi Kayan. Hence, SABIC’s slate of chemicals, especially the most advanced
chemicals, will add a great deal to Aramco’s. $Within Saudi Arabia, SABIC obtains all of its feedstock from Aramco. SABIC’s productions of methanol, ammonia, and urea are very competitive because they have the advantage of being based on methane sold to it by Aramco at $1.25/million British thermal units (MMBtu), certainly the cheapest methane gas anywhere in the world. By the same token, all of SABIC’s productions based on ethane are competitive, due to a price of $1.57/MMBtu offered by Aramco, making it the lowest-priced ethane in the world. The kingdom’s Council of Ministers decided the prices of methane and ethane in 2015. These prices were probably based on the cost to Aramco, not prices on the international markets. The price set in 2015, in spite of being low, was, in fact, a major increase as until then prices had been set at $0.75/MMBtu for both methane and ethane. The local Saudi price for propane, an important feedstock, especially for high-value advanced chemicals, is defined by a formula based on the price in Japan minus a 30 percent discount to reflect the value of local long-term contracts. In reality, however, there are no internationally agreed prices for these gases. Each market prices itself in light of the local demand, the cost of exports, and the alternative uses for the gas. For example, today the price of methane in the United States is staying mainly below $2.3/MMBtu. This is very low compared to the amount paid by Europeans for Russian gas, which oscillated between $9.4/MMBtu in September 2018 and $7.21/MMBtu in January 2019.主题 | Energy Markets & Governance
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