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Saudi Aramco Diversification | Weekly News Update

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Last week, Saudi Aramco announced that they will not only be taking the company public in 2018, but they will also be diversifying their oil production plan. An esteemed leader in the railroad industry passes away after many years of innovation. ELD’s continue to cause concern among certain players, and California wildfires, though devastating to local life have little impact on freight. China is creating a carbon market to fight climate change.

Saudi Aramco States their IPO is ‘On Track’ amid Rumors of Oil Diversification

Saudi Aramco – the state-owned company with the world’s highest oil revenue – announced that they are on track to go public next year.  The plan is to list on Tadawul (Saudi Arabia’s only stock exchange) but other markets have not been ruled out.  Aramco hopes to gain a valuation around $2 trillion through an IPO, though potential investors have debated its ability to reach this level as its main revenue stream is tied to the volatility of global oil prices.    Saudi Arabia has been the lynchpin in OPEC’s decision to enact production quotas in 2017 and in OPEC’s extension of cuts through 2018, which have ultimately allowed global oil markets to come off 2016 lows for a more attractive environment for oil market investment.  Interestingly enough, profits from the potential IPO are planning to be invested in projects to wean the country off of its crude independence to renewable energy sources and other alternative energies.

Aramco has also hit the news for potential interest in diversifying its current oil production plan.  Aramco has international investments in the refining sector, including joint-ownership of the Motiva Refinery in Port Arthur Texas (which has the highest capacity of all US refineries at 600,000 barrels per day).  Oil production, on the other hand, has not stretched outside of Saudi Arabia.  Aramco has made initial inquiries on assets in two giant oil-and-gas basins in the US, where significant amounts of shale oil is being produced.  The move would help to diversify Aramco’s production portfolio ahead of an IPO with the shale boom of the US.  Aramco is also looking for investment in US LNG operations to diversity their energy portfolio.

The Death of CSX’s CEO Comes in the Midst of the Railway’s Overhaul

Hunter Harrison, the CEO of CSX Transportation, passed away on December 16th from complications from a recent illness. Harrison was well regarded in the rail industry for instituting his “Precision Railroading” strategy that turned around the Canadian National (CN) and Canadian Pacific (CP) railways in his time as CEO of both companies. Harrison came on as CEO of CSX in March 2017 and began to implement Precision Railroading in short order.  The strategy – which calls for consolidation of railway hubs, efficiency changes to switching yards, and better utilization of newer locomotives – has caused growing pains for CSX in 2017 as customers voice displeasure with changing schedules and intermittent delays.   Harrison stated that “the best is right around the corner” this past fall as his plans continued to take form.  CSX is expected to continue with the Precision Railroading strategy after Harrison’s passing.

In Other News

12/18

FreightWaves: ELDs have arrived, along with confusion and anxiety over impact

Nearly 17 years in the making since the Federal Motor Carrier Safety Administration first attempted to require electronic logging devices (ELDs) on commercial vehicles, the day has finally arrived for most of the nation’s 3 million plus driver workforce to begin using the devices.

CNBC: CSX stock tumbles after death of CEO Hunter Harrison, but JP Morgan says ‘legacy will continue’

Shares of CSX Corporation fell 2 percent in premarket trading Monday in the wake of CEO and railroad turnaround specialist Hunter Harrison’s passing on Saturday.  The executive was renowned in the industry for his ability to save struggling freight railroads, having spent years reforming two of Canada’s largest railways before taking the helm at CSX in March.

12/19

Bloomberg: China Is Creating a Massive Carbon Market to Fight Climate Change

China, which more than a decade ago surpassed the U.S. as the world’s biggest polluter, is looking to financial markets to help restrain its greenhouse gas emissions. On Tuesday, China confirmed that it’s building what will become the biggest market for the carbon dioxide emissions that stem from burning fossil fuels.

12/20

Bloomberg: Saudis Say Aramco IPO ‘On Track’ as All Options Open for Listing

Saudi Aramco’s IPO is moving ahead and all options are open on where to list shares of the giant oil producer, the country’s finance minister said.  The Saudi Arabian Oil Co., the world’s top crude exporter known as Aramco, is “on track” for plans to list shares on the local bourse Tadawul and possibly on foreign exchanges.

WSJ: Tables Turned: Saudi Arabia Hunts for Oil Assets in the U.S.

Saudi Arabia is hunting for an energy deal in American shale country, as economic upheaval pushes it to seek its first international oil-and-gas production investments.

12/21

Bloomberg: Nestle to Sell U.S. Chocolate Business as Market Melts

Nestle SA aims to sell its U.S. confectionery unit by the end of March as Chief Executive Officer Mark Schneider seeks to clinch his first major divestment at the world’s largest food company.

12/22

American Shipper: FTR – LA Wildfires Having Limited Overall Impact on California Freight Market

Wildfires have raged in Southern  California since the beginning of December but the overall impact to California freight has been limited and is likely to return to normal activity quickly according to freight transportation forecaster FTR. Load board Truckstop.com and FTR collaborated on an analysis of California freight volume and found outbound van volumes look to be at a ‘normal’ level for early December.

This weekly publication is designed to highlight relevant industry news to provide professionals in the transportation, supply chain, and energy sectors with up-to-date information in a rapidly changing marketplace. This update is purely a compilation of industry news and as such, does not necessarily reflect the opinion of Breakthrough®Fuel. We do not warrant or guarantee accuracy or completeness of information. For additional information, please contact us at info@breakthroughfuel.com.

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