Saudi-Aramco-sprawls-in-Korea
Seen is a Sadara plant, which is Saudi Aramco’s joint venture with Dow Chemical Company. Courtesy of Saudi Aramco

Does state oil company have too much market power?

Few Koreans know much about Saudi Aramco, the oil company headquartered in Saudi Arabia, but the outfit continues to expand its footprint here silently.

Early this week, Hyundai Heavy Industries Holdings said in a regulatory filing that it had inked a deal with Saudi Aramco for some of its shares in subsidiary Hyundai Oilbank.

Under the contract, Saudi Aramco agreed to purchase a 17 percent stake in the country’s fourth-largest oil refiner for 1.4 trillion won ($1.24 billion).

Hyundai Heavy Industries would welcome the fresh inflow of funds because the world’s largest shipyard has just acquired the No. 2 player, Daewoo Shipbuilding & Marine Engineering.

Hyundai Heavy originally planned to secure the necessary funds through a listing of Hyundai Oilbank. But this was postponed, thus causing concern at Hyundai Heavy.

Saudi Aramco, which advanced to Asia’s No. 4 economy in the early 1990s, is already the largest shareholder of the country’s third-largest oil refiner S-Oil with a stake of 63.41 percent.

Against this backdrop, some are worried that Saudi Aramco is getting too strong in the Korean market. But others counter that its stake in Hyundai Oilbank is less than 20 percent, and has nothing to do with managerial rights.

Saudi Aramco, which is based in Dhahran, is one of the largest firms in the world. It has the world’s second-largest proven crude oil reserves and daily oil production, respectively.

According to Moody’s Investors Services, the company is the most profitable business on the planet, chalking up profits of $111.1 billion in 2018 to nudge past Apple.

The credit ratings agency said that the amount is almost double that of No. 2 player Apple, which recorded a profit of $59.5 billion last year.

Despite its scale, the outfit remains one of the most secretive entities under the ownership of the Saudi state.

After acquiring the Hyundai Oilbank stake, Saudi Aramco’s Senior vice President Abdulaziz Al-Judaimi said that the investment will support its crude oil placement strategy.

Saudi Aramco continues to strengthen its position in the downstream sector. This acquisition demonstrates our investment in the highly complex refining sector in Asia, and continuous commitment to the region’s energy security and development,” he said.

The investment supports Saudi Aramco’s broader downstream growth strategy, as well as providing long term crude oil placement supply options and product off-takes as part of our trading business.”