Stalled Aramco IPO sets back deal-making at U.S. subsidiary Motiva

Stalled Aramco IPO sets back deal-making at U.S. subsidiary Motiva

Saudi Aramco’s delayed initial public offering is sidelining grand North American expansion plans at its U.S. refining subsidiary Motiva Enterprises LLC, people familiar with the matter said, at a time when its rivals grew their market share, Trend reports citing Reuters.

After dissolving a partnership with Royal Dutch Shell PLC two years ago, Motiva set out to rebuild and boost market share in the Americas. It evaluated deals for LyondellBasell Industries NV's Houston refinery, with the Caribbean government of Curacao, and considered expanding its sole U.S. oil refinery.

But none of those came to pass as the company feared it might pay too much for acquisitions or become too exposed to disruptions by expanding its sole U.S. refinery, the people said. As a result, Motiva has slipped to 11th place from ninth among the top U.S. refiners by capacity since striking out on its own, according to U.S. government data, as other refiners inked deals to take advantage of the shale boom.

“They were very handicapped by the fact that the kingdom was contemplating the IPO,” a refining consultant to Motiva said, speaking on condition of anonymity as the talks were private. “What they told us was ‘until this gets done or resolved, we cannot do anything.’”

Saudi Aramco did not want Motiva to enter deals that could hamstring its IPO or raise questions about its strategy, leaving Motiva unable to expand, the people said.

Plans for the Aramco IPO were shelved last year for the foreseeable future, sources told Reuters in 2018. Saudi Energy Minister Khalid al-Falih said in January the kingdom would still go ahead, and list the company by 2021.

A Motiva executive said the company has not given up on increasing its U.S. processing might.

“We don’t comment on anything specifically, but we do want to increase our refining capacity,” said Todd Fredin, the company’s head of supply, trading and logistics.

A spokeswoman for Motiva declined to comment on past or potential acquisitions and expansion plans. Saudi Aramco declined to comment.

Vision 2030, the Saudi Crown Prince’s signature economic program designed to lessen the kingdom’s reliance on oil, also undercuts the need for U.S. expansion, said Andrew Lipow, president of refining consulting firm Lipow Oil Associates.

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

Rivals have used acquisitions and expansion to boost their share of the U.S. market. Marathon Petroleum Corp last year acquired the fifth largest U.S. refiner Andeavor for $23 billion.

This year, Exxon Mobil Corp embarked on a multi-billion dollar refinery expansion and Chevron Corp added a second Gulf Coast refinery as the two largest U.S. oil companies take advantage of record production out of Texas shale fields. The United States is now the world’s top oil producer, pumping more than 12 million barrels a day.

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