Saudi Aramco may consider spinning off its growing downstream division, which includes oil refining assets, a business where the oil giant is investing heavily to meet rising fuel demand in Asia, strategists said.
Aramco must first complete its planned acquisition of a strategic stake in Saudi petrochemical maker SABIC before deciding whether to list its downstream business. No decision has been made and Saudi Aramco declined to comment on what it called "rumors or speculation."
Riyadh-listed SABIC, the world's fourth-biggest petrochemicals company, is 70 percent owned by the Public Investment Fund (PIF), Saudi Arabia's top sovereign wealth fund. It has a market capitalization of 385.2 billion Saudi riyals ($103 billion).
"The first step will be completing the acquisition of the 70 percent of SABIC held by PIF and integrating that into Aramco's petrochemical operations. That will be a lengthy and complicated business given the size of SABIC," said Robin Mills, CEO of Qamar Energy, and a former Shell executive.
"After that, yes, there could be an offering of additional stock in a merged downstream unit either on Tadawul (Saudi's stock exchange) or an international exchange," Mills said. "This would sidestep many of the concerns on listing the full company over transparency, reserves, political exposure, sensitivity to oil price, country exposure and the large size of the unit."
Restructuring the Aramco listing along those lines may make it more appealing to potential investors who have voiced skepticism about the transparency of the kingdom's crude oil reserves, the long-term viability of the oil industry and the balance between investor and Saudi national priorities.