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Aramco's US$1.6b Hyundai Oilbank stake deepens refiner ties in Asia
[SINGAPORE] Saudi Arabian Oil Co is buying up to 19.9 per cent of South Korean oil refiner Hyundai Oilbank Co for 1.8 trillion won (S$2.2 billion), tightening the OPEC behemoth's grip in the world's biggest crude consuming region.
Aramco, as the company is known, and Hyundai Heavy Industries Holdings Co, which is selling the stake, are expected to hold board meetings early next month to approve the investment, a spokesman for the South Korean company said. Hyundai Heavy Industries, which rose as much as 6.6 per cent after the announcement Monday, said it hopes to complete the sale this year and Aramco is expected to buy Hyundai Oilbank shares for 36,000 won each.
The world's biggest oil exporter is expanding its customer base in Asia as it moves toward listing part of Aramco in what could be the biggest initial public offering. Aramco has been on a refining investment spree across Asia in recent years, looking to take positions in plants in China, India, Indonesia, Malaysia and Pakistan. The company has also traditionally taken equity stakes in refiners, such as Show Shell Sekiyu KK in Japan, which is similar to its new move with Hyundai Oilbank.
"Saudi Aramco growing its footprint in the Asian refining industry is now a well-established strategy," said Vandana Hari, founder of Vanda Insights, a Singapore-based provider of oil market analysis.
"It offers security of demand for Saudi crude and enables the company to participate in downstream margins, especially in a region with high demand growth for fuels."
The purchase into Hyundai Oilbank helps expand Saudi Arabia's presence in the country, where it already holds 63.4 per cent of the common stock of S-Oil Corp, another South Korean refiner.
Saudi Arabia was South Korea's biggest crude supplier last year, with its nearly 876,000 barrels a day of shipments accounting for about 29 per cent of total imports. From Saudi Arabia's perspective, South Korea bought about 12 per cent of its total crude exports in December, according to data compiled by Bloomberg.
The sale would make Aramco the second-biggest shareholder of Hyundai Oilbank after Hyundai Heavy Industries, which currently has a 91.1 per cent stake, and will help prop up the refiner's financials, the South Korean company said. Funds from the sale may also be used to invest in new businesses, it said.
Hyundai Heavy Industries has been preparing an initial public offering of Hyundai Oilbank, but that could be delayed due to the share sale to Aramco, according to the company spokesman.
Hyundai Oilbank has 650,000 barrels of daily oil refining capacity, and exports petroleum products globally, according to its website. It operates 2,400 gas stations and vehicle charging stations around South Korea. It also produces petrochemicals and has an oil terminal at Ulsan.