Saudi Arabian oil and petchems majors Aramco and SABIC are studying the feasibility of joint refinery and integrated downstream petrochemicals production, the news agency Bloomberg has reported, citing people with knowledge of the talks. The refinery would be built at Yanbu, where both companies already have a sizeable presence. Both companies have hinted in the past that they were working on technologies for producing petrochemicals directly from oil, while sidestepping the refinery phase.

Bloomberg’s sources said the intended collaboration was the reason why Aramco has delayed construction of its 400,000 bbl/d integrated refining and petrochemical complex in Yanbu. Aramco, which claims the title of world's largest oil producer, has been keen to move farther downstream into chemicals. The company already is engaged in the Sadara joint venture with Dow Chemical but a potential cooperation with SABIC would likely be welcomed by regional players, observers believe.

An alliance between the two Middle Eastern giants is long overdue, as both operate in the same markets, analysts told the news agency. They added that this would help avoid duplication of projects and promote cost effectiveness at a time when dwindling oil revenues are pressuring budgets in the Kingdom.

Aramco likely to float less than 5%

After Saudi officials announced in January that Aramco was weighing plans to float some of its shares on the Saudi Stock Exchange, speculation became rampant that it might offer shares in its lucrative upstream assets or bundle its downstream services.

Some analysts meanwhile have suggested that even with oil prices low, the company has no urgency to sell any assets within the next five years. However, Deputy Crown Prince Mohammed bin Salman recently reiterated that the Kingdom was working on a plan to issue shares as early as 2017 and no later than 2018.                      

The prince said shares in the parent company as well as a number of its subsidiaries would be offered to the public. with the planned flotation totaling less than 5%. The rest of Aramco would still be owned by the Saudi government but controlled through a transformed sovereign wealth fund.

The Public Investment Fund (PIF) already holds stakes in local companies including petrochemical giant SABIC. After the relaunch, it would be the largest on earth, media reports have quoted bin Salam as saying.