While concerns about future oil demand and stranded asset risk hamper investments in new refineries for many downstream players around the world, Saudi Aramco is not among them.
"We are expanding our downstream, we are making it the leading business globally, matching our upstream," Aramco CEO Amin Nasser told the Energy Intelligence Forum this week. Aramco, like its Mideast Gulf national oil company rivals, believes that demand for oil products will remain healthy for decades to come, especially in developing countries.
It is placing bets on continued growth in Asia, in particular, following a strategy that will lock in crude demand from major consuming countries through investments in local refineries and petrochemical plants. “We are maximizing value through these investments, creating more profitability, more efficiency and more presence in different parts of the world," Nasser said.
Domestically, Aramco has also expanded its petrochemicals business through its acquisition of Saudi Arabia's Sabic in 2020. Globally, there have been capital constraints on new refinery projects, particularly in Western countries, as the energy transition poses questions about future demand for oil products.
However, some industry executives warn that failure to increase refining capacity will lead to tighter markets with a greater chance for price spikes in the years to come, particularly with the realignment of oil trade flows after the outbreak of the Ukraine war last year.
China has been Aramco’s prime target for expanding its downstream footprint recently. In September, the Saudi oil giant signed an agreement paving the way for discussions about the possible acquisition of a 10% equity stake in Jiangsu Shenghong Petrochemical, a subsidiary of Jiangsu Eastern Shenghong.
Aramco has been on a shopping spree this year with acquisitions that open access to new markets. After recently making its first LNG investment, in Australian player MidOcean, Aramco is looking for more LNG assets globally, Nasser confirmed.
The company also managed to enter the Latin American market through a retail fuel investment in Chile this year. This week, officials from the kingdom attending the Belt and Road Forum in China are expected to sign additional preliminary agreements that could secure new deals for Aramco.
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