THE WALL STREET JOURNAL: Aramco Mulls Domestic IPO For $5 Bln Export Refinery: "ExxonMobil (XOM) and Royal Dutch/Shell (RD SC) already operate joint venture refineries in the kingdom, and Shell is among the first foreigners to enter the upstream sector, exploring for gas." (ShellNews.net) Posted 10 May 05

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LONDON -- State-owned oil giant Saudi Arabian Oil Co. (SOI.YY) Monday said it will seek to list a $5 billion export refinery on the domestic stock market, which has been growing at near 75% a year on high oil prices.

The listing would be the first time private Saudi investors would be allowed to own a piece of the world's biggest oil producer, commonly known as Aramco.

Aramco is looking for a joint venture partner for the new refinery before it launches an IPO, and says it has a shortlist including Asian or U.S. partners.

Aramco has been seeking foreign partners for the refinery, valued at between $4 billion-$5 billion, with a capacity to produce 400,000 barrels day, Isam A. Al-Bayat, vice president of new business development said in a statement. A foreign partner such as one of the big oil majors would lock in customers, guaranteeing revenue in what's traditionally been a volatile business.

A domestic listing could eventually open up the refinery to foreign investors. Under current law, the Saudi stock market, the biggest in the Middle East, is open only to Saudi or neighboring members of the Gulf Cooperation Council. But regulators say laws limiting overseas capital to offshore funds will be lifted within a few years.

It's not immediately clear why Aramco has decided on an IPO. The company has appeared to have had a hard time drawing in foreign investors to a sector that has, until recent high oil prices, operated under thin margins. U.S. refiners have generally opted to upgrade existing facilities rather than overcome the economic and environmental hurdles of building greenfields refineries.

In addition, Aramco's huge commitment to spend some $50 billion to raise crude oil production to 12.5 million b/d by 2009 could make it more attractive to tap into the soaring domestic capital markets to spread some of the venture's risk.

"We are ready whenever the investor is, to be a secure supplier of fuel and feedstock, to serve as the source of a major asset base for expansion, and to participate in, or encourage investors to capitalize on, these opportunities aimed at achieving continued economic development in the Kingdom," al-Bayat said in the statement. Aramco will spend some $20 billion-$23 billion in materials and equipment through 2010, al-Bayat said, part of its efforts to meet strong world oil demand.

A big part of that effort is expanding its refineries. Al-Bayat also said upgrading the 400,000 b/d Rabigh refinery into an integrated petrochemicals complex should be done by 2008. Aramco signed a memorandum of understanding with Sumitomo Chemical of Japan in May, 2004.

Aramco is also considering a $6 billion upgrade to its Ras Tanura and Ju'aymah refineries and petrochemicals plants.

Further projects in the pipeline including conversion industries for olefins, power generation and distribution for Aramco's southern facilities and divestment of non-core assets such as gas turbine repair and refined-products distribution, he said.

Saudi Arabia's petrochemicals industry is already partly privatized through Saudi Basic Industries Corporation, or Sabic, which has listed 30% equity on the Saudi market.

ExxonMobil (XOM) and Royal Dutch/Shell (RD SC) already operate joint venture refineries in the kingdom, and Shell is among the first foreigners to enter the upstream sector, exploring for gas.

-By Shai Oster, Dow Jones Newswires; +44-20-7842-9357; shai.oster@dowjones.com

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