Restructuring Of Aramco Right Move For Oil Sector
(MENAFN- Arab Times) Last week, the announcement made by the government of Saudi Arabia about forming a new supreme petroleum authority to oversee the oil and gas sector took the latter by surprise. It came at the right time when the Saudi oil sector needed a good shake-up.
Even though the purpose and objectives behind this decision are yet to be known, it is apparent that the shake-up will occur especially since the Saudi oil industry is expanding in all aspects and recently became involved in non-core business activities.
According to the announcement, the Supreme Petroleum Council will consist of ten members out of which 5 will be ministers including minister of Oil. The other five members will be members of the Saudi Aramco including its chairman. The council will be headed by the Deputy Crown Prince of Saudi Arabia to give it the power it needs to run the biggest oil-producing country on this planet.
There is no doubt that this new petroleum council will take over all the activities of the energy sector and will most likely restructure it completely which will lead to the creation of more specialized companies. However, the important elements in this regard are accountability and greater transparency.
Upstream
This step may lead to either break down or separation of upstream from downstream. The new upstream sector will have its new independent entity, which will focus on exploration and crude oil production. There will be a separate company for local and international refining, while gas production and exploration will be the third entity. The independent specialized companies will each have their own set of board members, who will be reporting to the existing Aramco board.
The first candidate for facing such changes could be the petrochemical industry, as this industry is quite advanced and has its own company called Sabic. It is bound to get bigger and more advanced if it is given the responsibility of running the new joint venture 'Al-Sadara' of Dow-Saudi Aramco partnership. Or else, another petrochemical company, which will be named Al-Sadara, will be established to run this industry by the end of this year.
In the recent years, the Saudi oil company took over non-core activities that were not affiliated to the oil sector such as building King Abdullah University, a football stadium and a sewage plant in Jeddah area. However, this has put extra burden on the oil sector as well on the minister and ministry of Oil.
More than ten companies will be established in the coming months to take over such specialized industries. Aramco board will be busy organizing and supervising these activities until when it is able to measure the performance of each activity and company. This will be the broad objective behind restructuring Aramco of Saudi Arabia based on a clear vision.
It will be a new era € an era of accountability and transparency when the annual year-end review of profit and loss statement will be exposed to the public. The Saudi oil sector will face new challenges during this new era.
The formation of the Supreme Petroleum Council of Saudi Arabia is certainly a right decision that is aimed to share responsibility with others. It is news that is welcomed, as it comes with implementation of principles of accountability and transparency in sharing financial results with others.
However, the fact that its performance will be compared with its international counterparts will be challenge by itself.
Even though the purpose and objectives behind this decision are yet to be known, it is apparent that the shake-up will occur especially since the Saudi oil industry is expanding in all aspects and recently became involved in non-core business activities.
According to the announcement, the Supreme Petroleum Council will consist of ten members out of which 5 will be ministers including minister of Oil. The other five members will be members of the Saudi Aramco including its chairman. The council will be headed by the Deputy Crown Prince of Saudi Arabia to give it the power it needs to run the biggest oil-producing country on this planet.
There is no doubt that this new petroleum council will take over all the activities of the energy sector and will most likely restructure it completely which will lead to the creation of more specialized companies. However, the important elements in this regard are accountability and greater transparency.
Upstream
This step may lead to either break down or separation of upstream from downstream. The new upstream sector will have its new independent entity, which will focus on exploration and crude oil production. There will be a separate company for local and international refining, while gas production and exploration will be the third entity. The independent specialized companies will each have their own set of board members, who will be reporting to the existing Aramco board.
The first candidate for facing such changes could be the petrochemical industry, as this industry is quite advanced and has its own company called Sabic. It is bound to get bigger and more advanced if it is given the responsibility of running the new joint venture 'Al-Sadara' of Dow-Saudi Aramco partnership. Or else, another petrochemical company, which will be named Al-Sadara, will be established to run this industry by the end of this year.
In the recent years, the Saudi oil company took over non-core activities that were not affiliated to the oil sector such as building King Abdullah University, a football stadium and a sewage plant in Jeddah area. However, this has put extra burden on the oil sector as well on the minister and ministry of Oil.
More than ten companies will be established in the coming months to take over such specialized industries. Aramco board will be busy organizing and supervising these activities until when it is able to measure the performance of each activity and company. This will be the broad objective behind restructuring Aramco of Saudi Arabia based on a clear vision.
It will be a new era € an era of accountability and transparency when the annual year-end review of profit and loss statement will be exposed to the public. The Saudi oil sector will face new challenges during this new era.
The formation of the Supreme Petroleum Council of Saudi Arabia is certainly a right decision that is aimed to share responsibility with others. It is news that is welcomed, as it comes with implementation of principles of accountability and transparency in sharing financial results with others.
However, the fact that its performance will be compared with its international counterparts will be challenge by itself.
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