Saudi Aramco takes full ownership of Dutch firm in €1.5bn deal

The state-controlled oil producer had formed the synthetic rubber joint venture with its partner Lanxess in 2016

Saudi Aramco is eyeing a bigger role in the energy markets by transforming itself into an oil and chemicals giant. Hamad I Mohammed / Reuters

Saudi Aramco, the world’s largest oil producing company, said on Wednesday it has taken full control of a Dutch rubber joint venture in a transaction valued at €1.5 billion.

The Saudi state producer bought the remaining 50 per cent stake in Netherlands-based Arlanxeo, acquiring the shares of its partner Lanxess. Aramco and its Dutch partner had formed a specialty chemicals joint venture in 2016.

The complete acquisition of the chemicals venture will diversify Aramco’s downstream portfolio and “accelerate growth into new chemicals including butadiene and isobutylene,” Saudi Aramco senior vice president, downstream, Abdulaziz Al Judaimi said in a statement on Wednesday.

The two chemical compounds are used largely in the manufacture of synthetic rubber.

Saudi Aramco, which produces and sells crude on behalf of the Saudi state, has expressed its intentions to become an “energy and chemicals” company as it looks to earn more margins from the sale of refined products.

Aramco has progressed with large-scale chemical ventures at home and abroad including the development of a $20bn oil-to-chemicals facility along the Red Sea coast in the kingdom as well as a $44bn refining and chemicals complex on the west coast of India. The plans are at the heart of its diversification strategy that aims to turn two to three million barrels of oil products per year into chemicals.

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Saudi Aramco’s Dutch investment will leverage on the “strong feedstock position” of the company, it said. The parties are targeting the end of this year to complete the transaction. The deal has been approved by the boards of both Aramco and Lanxess and remains subject to regulatory approvals and consultation of relevant employee representative bodies, the company said.

The acquisition is set to “enhance Saudi Aramco’s sustainability efforts” particularly in the field of performance-related fuel consumption, with potential savings of almost 7 per cent.

Saudi Aramco, which has recently begun to develop research capabilities in fuel efficiency and announced the signing of a partnership with Japanese automaker Mazda on Wednesday, will see complementary benefits from the full ownership of Arlanxeo. The company is engaged in projects with vehicle manufacturers to increase mileage efficiency and reduce engine emissions.

The kingdom, through its sovereign wealth fund, is also exploring investments in electric vehicles. The Public Investment Fund has already built an undisclosed stake of between 3 to 5 per cent in electric car maker Tesla this year, according to a Financial Times report.

Aramco also seeks to embrace electric vehicles, a segment it had earlier viewed as a threat to its oil export business.

The company's pivot downstream also includes a possible plan to buy a stake in Saudi Basic Industries Corporation, the Middle East's largest chemicals company. Aramco and Sabic are joint venture partners on the Saudi west coast oil-to-chemicals complex that will be integrated with a 400,000 barrels per day refinery at Yanbu.