Saudi Aramco is exploring a significant reorganisation of its gas business that might in time lead to the formation of an independent unit with the possibility of a separate stock market flotation. The oil company has mandated investment bank Evercore to act as its adviser to the proposed reorganisation, say Bloomberg sources. The company has not officially discussed the proposal and talks are still being held.
Aramco Looks to Separate Its Growing Gas Business.
Under the proposed restructuring, Gas will be independently operated as part of Aramco. At present, the company has to adopt two main segments, before restructuring, namely upstream and downstream. The restructuring will ensure a greater degree of independent operation to gas business.
The proposed first independent business will encompass Aramco’s growing natural gas business, both in its home market and in international markets through ventures like liquefied natural gas. Reuters has previously reported that the firm was weighing creating a new gas division as part of an overall strategy to grow its gas operation and to draw in outside investment.
Evercore Advises on Potential Listing
Evercore has been appointed as adviser to Aramco on the restructuring. The Wall Street investment bank has previously advised the state-backed Saudi oil firm on strategic deals, including its landmark 2019 listing.
A separate gas division might give Aramco a route to tapping capital markets through the sale of a minority stake or an initial public offering. People told Bloomberg News that any listing could worth more than $100 billion, but there was no firm valuation or timetable for a sell-off.
Aramco did not respond to concerns raised about this plan, and the investment bank’s representative also did not respond.
Jafurah as Center of Gas Expansion
One of the key reasons for Aramco’s focus on gas is the Jafurah gas field. As the company invests billions in the project, it is ramping up its domestic gas production and lessening the reliance on oil-based power.
Reuters said Jafurah is part of Aramco’s plan to expand its natural gas business, which has been looking to do so through its downstream and other gas projects. Aramco has also used deals related to infrastructure to attract outside capital to some developments in Jafurah.
Its gas output is forecast to ramp up sharply into the end of the decade as new projects come online. Bloomberg reporting has as the company forecasted that gas production will jump about 80% through 2030 and believes the business might produce huge incremental operating cash flow.
Why a Separate Gas Business Matters
An independent gas division could also offer Aramco more outside investment and capital raising options for future ventures. Beyond parent-company capital raising, the company could monetize part of the gas business and keep hold of it.
This would also be in line with wider trends among Gulf energy companies. Abu Dhabi’s ADNOC has, in the past, floated interests in some gas, drilling, and petrol retail businesses while retaining control of its primary operations.
