Aramco turns to big data to shape M&A and boost profit – executive

DUBAI (Reuters) – Saudi oil giant Aramco is boosting its big data and artificial intelligence unit that links up its assets to help maximise profit, assisting on decisions from trading to acquisitions, a senior executive told Reuters.

“We have 70 people working on this, we’re still adding more,” Yasser Mufti, Aramco’s executive vice president for products and customers, said in an interview offering rare insight into its operations.

Once the realm of international oil companies, the unit called Global Optimizer was set up as a department under its downstream business in 2022 and stems from an overhaul that the state oil giant began in 2021.

With the broader revamp, Aramco aims to make investments that better reflect the company’s sprawling footprint and to respond to market changes faster. Aramco also has asset-specific reviews underway to boost returns.

Aramco is continuing to explore potential deals such as the purchase this week of a stake in retail business Gas & Oil Pakistan, as well as refineries in Asia, Mufti said, without giving further details.

Aramco is in talks to buy a stake in Shandong Yulong Petrochemical, following a string of investments in Chinese refineries, bought a stake in liquefied natural gas company MidOcean Energy – part of a bigger push into gas – and listed shares of its base oil unit Luberef, with other share sales also reportedly planned.

More sophisticated commercial models like the Global Optimizer can translate to $1.5-$2 per barrel of additional earnings before interest and taxes (EBIT) compared to more traditional models, according to Oliver Wyman, which advised on the project. The consultancy estimates oil majors make between $4 and $7 of downstream earnings per barrel of oil.

“We built up a lot of capacity to optimize, to trade, to deal with risk, to deal with uncertainty,” Mufti said, adding high-quality assets and a commercial mindset could “push these numbers to be on the high side if not higher than that range.”

Saudi Arabia, the world’s top oil exporter, relies heavily on Aramco’s profit. The kingdom directly owns 90.19% of Aramco and its sovereign Public Investment Fund owns a further 8%.

Analysts forecast $121.9 billion in net profit for Aramco in 2023, according to LSEG data, down from $161.1 billion last year. Brent crude, trading at about $74.85 on Thursday, has averaged $82.33 a barrel in the year to date from a roughly $99 average last year.”As we book returns from this and put money in the bank, it creates a baseline and then that becomes expected … the challenge is, how can we sustain the highest possible recurring EBIT,” Mufti said.

“A handful of refineries” are likely contributing their full potential of additional earnings through the Global Optimizer, while others still have more potential, he said.

Along with higher shareholder returns, the profit boost will also benefit Aramco’s joint venture partners, Mufti said. Aramco’s scale, “M&A activity and its growth in fields such as retail, mean that optimizing its system is particularly compelling in terms of assessing and capturing opportunities and creating value,” said Nadim Haddad, Oliver Wyman partner and head of oil and gas for India, the Middle East and Africa.

(Reporting by Yousef Saba; Editing by Elisa Martinuzzi and David Evans)