The Saudi energy giant’s entry into the Pakistani fuel retail market is a milestone for the company as well as the host country.
By Muhammad Ali
ISLAMABAD: The Saudi Aramco, one of the world’s leading integrated energy and chemicals companies, has signed definitive agreements to acquire a 40 percent equity stake in Gas & Oil Pakistan Ltd. (“GO”), an official statement issued from the company’s Dhahran headquarters said Tuesday.
GO, a diversified downstream fuels, lubricants and convenience stores operator, is one of the largest retail and storage companies in Pakistan. The transaction is subject to certain customary conditions, including regulatory approvals.
The planned acquisition marks Aramco’s first entry into the Pakistani fuels retail market, advancing the Company’s strategy to strengthen its downstream value chain internationally. Equally, Aramco’s entry into Pakistan’s fuel retail market is expected to bring numerous benefits to the country’s cash-strapped, investment-hungry economy.
The statement quoted Mohammed Y. Al Qahtani, Aramco Downstream President, as saying: “Our second planned retail acquisition this year aligns with Aramco’s downstream expansion strategy, with a clear path ahead for growing an integrated refining, marketing, lubricants, trading and chemicals portfolio worldwide. GO has a significant storage capacity, high-quality assets and growth potential, which will help launch the Aramco brand in Pakistan.”
This transaction would enable Aramco to secure additional outlets for its refined products and further provide new market opportunities for Valvoline-branded lubricants, following Aramco’s acquisition of the Valvoline Inc. global products business in February 2023.
The move comes as Aramco seeks to expand its downstream business globally and capitalize on growing demand for energy in Asia. Pakistan, with a population of over 220 million, is a major consumer of oil and gas products.
The development marks a boost to trade and economic relations between Pakistan and Saudi Arabia. The Aramco-GO deal strengthens the economic ties between Pakistan and Saudi Arabia, fostering closer cooperation in various sectors beyond energy. This will open up new opportunities for trade and investment, further benefiting both economies.
The transaction comes as a boost to foreign direct investment in Pakistan: As a Direct Foreign Investment (DFI) move, the acquisition signals confidence in Pakistan’s economic potential, paving the way for further foreign investment from Aramco and other international players. This influx of capital will be crucial for bolstering Pakistan’s foreign exchange reserves and supporting infrastructure development projects.
The expansion of Aramco’s operations in Pakistan will create significant new job opportunities across various sectors, including retail, logistics, and engineering. This will not only boost employment rates but also empower individuals and their families, contributing to the overall economic growth.
Aramco’s extensive expertise in the oil and gas industry will provide valuable learning opportunities for Pakistani professionals. This knowledge transfer will contribute to the development of a skilled workforce and enhance the country’s capacity to manage its own energy resources effectively.
Best of all, it will enhance Pakistan’s energy security. The global energy giant’s presence in Pakistan’s fuel retail market will diversify the country’s supply chain, reducing its dependence on a few suppliers. This increased energy security will mitigate the risk of price fluctuations and disruptions, ensuring a more stable and reliable energy supply for consumers and businesses.
Aramco’s entry into the Pakistani market is expected to face competition from existing players such as Shell and Total. However, the company’s vast resources and experience in the oil and gas industry are likely to give it a competitive edge.
The acquisition is still subject to regulatory approval, but it is expected to close in the first half of 2024.
This is a major development for the Pakistani oil and gas industry and could lead to increased investment and competition in the market. It is also likely to benefit consumers by providing them with more choices and potentially lower prices.
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