Aramco’s Delayed IPO Puts US Subsidiary Motiva in a Fix

The proposed initial public offering of Saudi Aramco was supposed to be the world’s first trillion dollar listing, and naturally, it would have meant more money for the Saudi owned natural gas and oil company’s subsidiaries to expand. However, the way in which the whole thing has stalled has made life difficult for the subsidiaries, and one which is currently struggling to put is expansion plans in motion is Aramco’s American subsidiary Motiva Enterprises. According to several reports, the company used to be among the top ten refiners in the United States but have since slipped down due to its inability to expand and during that period its competitors have zoomed past due to the shale oil boom in the country.

The Saudi Aramco IPO was supposed to be Motiva’s salvation, but it was restrained from entering into deals until the listing was done and now that the listing would not be done until at least 2021, the American company finds itself in a massive fix. According to a consultant who has worked with Motiva,

They were very handicapped by the fact that the kingdom was contemplating the IPO. What they told us was ‘until this gets done or resolved, we cannot do anything.’

An executive at Motiva refused to speculate on specific matters regarding its expansion and its relationship with Aramco, but he did mention that the company wants to expand its refining capacities. It remains to be seen how successful they are in their efforts.

However, there are fears that the actual expansion plans for its overseas subsidiaries might not come about at all due to Crown Prince Mohammad bin Salman’s economic plan known as Vision 2030. The main thrust of that economic plan is towards the creation of jobs in Saudi Arabia, and many believe that the expansion of oil refineries in other countries might not be the best strategy when it comes to that. The head of the consultancy firm Lipow Oil Associates, Andrew Lipow said as much. He said,

They are in the process of trying to look toward 2030 and adding assets outside of Saudi Arabia is not as critical anymore. A refinery in the United States doesn’t create jobs in Saudi Arabia.

However, if that is indeed the strategy of the Saudi state, then the expansion plans of Motiva are going to take a major hit and could mean that more rivals are going to go past it in the years to come.

Copyright © 2020. FinanceOrange. All Rights Reserved.