Saudi Arabia likely to ramp oil output this year to meet ‘growth’ in demand

Saudi Arabia’s state-run oil company has said that production will trend slightly higher this year as it detailed plans to become the world’s leading energy and chemicals company by 2020.

Speaking on Tuesday, the president of Saudi Aramco, or to give it its full name, the Saudi Arabian Oil Company, said that despite the current oil market environment remaining “challenging,” the company is still looking for growth opportunities and joint ventures.

A worker stands at a pipeline, watching a flare stack at the Saudi Aramco oil field complex facilities in Shaybah, Saudi Arabia.

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A worker stands at a pipeline, watching a flare stack at the Saudi Aramco oil field complex facilities in Shaybah, Saudi Arabia.

President and Chief Executive Amin Hassan Nasser told journalists that the company – which recently announced it’s to sell a 5 percent stake – was still looking to expand its oil operations and was also looking at new joint ventures in the U.S., India, China and Indonesia. He also said that the company expects to indirectly create 500,000 jobs over the coming decade. Currently it employs 66,000 people.

Presenting the Saudi Aramco strategy at the press conference, the company said that “by 2020, we intend to be the world leading integrated energy and chemicals company, focused on maximizing value creation across the hydrocarbon chain, facilitating the sustainable expansion of the Kingdom’s economy and enabling a vibrant Saudi energy sector.”

He also told reporters that demand for Saudi Aramco’s oil is increasing and the company was ramping up production to meet that demand.

“We will meet the call on Saudi Aramco … The trend is increasing,” he told reporters, according to Reuters. “We are seeing demand growth in different places. We are seeing increases in India, in the U.S., and we are meeting that call on us.” He added that he expected total oil demand to climb by 1.2 million barrels per day this year.

Nasser’s comments come after Saudi Aramco’s ChairmanKhalid al-Falih was made Saudi Arabia’s new energy minister at the weekend, replacing Ali al-Naimi who had held the post since 1995.

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The comments also come after a U.K. newspaper reported that Saudi Aramco was planning a 3-way listing in New York, London and Hong Kong and planned to sell a 5 percent stake in the firm. The Telegraphnewspaper said on Monday that the state-run oil company was hoping to lure ExxonMobil, China’s Sinopec and BP into buying into the company.

Nasser said that the company was looking at the logistics of an Initial Public Offering (IPO) but would not comment on speculation over targeted buyers.

“Right now we are just looking at how much to list and where to list at this stage and until now there is no discussion about stakes by this company or that and now we are just looking at where to list.”

“As Saudi Aramco we are not talking to any of these companies about the listing of Aramco,” he insisted.

The sale of Aramco is planned as soon as 2017 or 2018 and would in theory be five times larger than any initial public offering (IPO) in history. It is expected to be valued at more than $2 trillion. Deputy Crown Prince Mohammed bin Salman first announced the decision to sell in April as Saudi Arabia’s government unveiled a long-term economic blueprint for life in a low-oil-price world.

Nasser would not be drawn on the valuation, however.

“I will not talk about valuation – it depends on so many things (and) it is too early –until we go to the market,” he said. He told CNBC that a listing would take at some point because of the sheer size of the company. He added that a time frame for the sale would soon be made public.

As the world’s largest oil exporter, the bulk of Riyadh’s state revenues come from energy exports. But with crude prices extending their declines — the per-barrel price of global benchmark Brent is down 60 percent since the rout first started in June 2014. The country logged a record $98 billion budget deficit for 2015.

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