Tue, Jan 29, 2019 - Page 10 News List

Saudi Aramco deal in South Korea deepens Asian ties

Bloomberg

Saudi Arabian Oil Co is taking a nearly 20 percent stake in South Korean oil refiner Hyundai Oilbank Co for US$1.6 billion, tightening the grip of the world’s top crude exporter on the biggest oil consuming region.

The Saudi state-owned giant, known as Aramco, is seeking to firm up its customer base and market share in Asia as it moves toward a partial listing in what could be the biggest-ever initial public offering.

The Hyundai Oilbank purchase announced yesterday would be the latest in Aramco’s refining asset spree across the region in recent years, eyeing stakes in plants in China, India, Indonesia, Malaysia and Pakistan. Aramco has also taken equity positions in whole refining companies, such as its 15 percent share in Japan’s Showa Shell Sekiyu KK or its 63 percent of the common stock in South Korea’s S-Oil Corp.

“Saudi Aramco growing its footprint in the Asian refining industry is now a well-established strategy,” said Vandana Hari, founder of Vanda Insights, a Singapore-based provider of oil market analysis. “It offers security of demand for Saudi crude and enables the company to participate in downstream margins, especially in a region with high demand growth for fuels.”

Aramco and Hyundai Heavy Industries Holdings Co, which is selling the 19.9 percent Hyundai Oilbank stake, are expected to hold board meetings early next month to approve the deal, a spokesman for the South Korean company said.

Hyundai Heavy Industries Holdings said it aims to complete the sale this year, which involves Aramco paying 36,000 won (US$32.10) per share.

Saudi Arabia was South Korea’s biggest crude oil supplier last year, with shipments of nearly 876,000 barrels per day accounting for about 29 percent of total imports.

From Saudi Arabia’s perspective, South Korea bought about 12 percent of its total oil exports last month, according to data compiled by Bloomberg.

The sale would make Aramco the second-biggest shareholder of Hyundai Oilbank after Hyundai Heavy Industries, which currently has a 91.1 percent stake, and would help prop up the refiner’s financials, the South Korean company said in a statement.

Funds from the sale might also be used to invest in new businesses, it said.

Hyundai Oilbank has 650,000 barrels of daily oil refining capacity and exports petroleum products globally, according to its Web site. It operates 2,400 gas stations and vehicle-charging stations across South Korea. It also produces petrochemicals and has an oil terminal at Ulsan.

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