Saudi Aramco, the world’s most integrated oil company, has made its first foray into Pakistan’s retail fuel market by acquiring a 40 per cent stake in Gas & Oil Pakistan (GO).

The acquired company, GO, is a diversified downstream fuels, lubricants, and convenience store operator with a network of more than 1,100 retail outlets in Pakistan. It provides petrol, diesel, and lubricants through storage points across Pakistan and a large fleet of oil tankers.

The transaction advances Aramco’s strategy to reinforce its global downstream value chain. It enables Aramco to secure additional outlets for its refined products, providing new market opportunities for Valvoline-branded lubricants — one of the largest lubricant brands — which it acquired in February 2023.

Besides being one of the world’s largest crude producers, Aramco has embarked on a transformational downstream growth strategy in recent years and is among the largest global refiners and chemical producers with operations across the Asian, European and North American markets.

By establishing a presence in this emerging market, the oil giant seeks to capitalise on Pakistan’s growing energy demands

By acquiring Valvoline, Saudi Aramco plans to expand its downstream presence in many countries, including China, the world’s second-largest economy.

Last year, Aramco announced its partnership with the Norinco Group and the Panjin Xincheng Industrial Group to develop a major refinery and petrochemical complex in Northeast China’s Liaoning province. It has also acquired a 10pc stake in Rongsheng Petrochemical Co Ltd in the Zhejiang province.

The acquisition of GO is Aramco’s first entry into the Pakistan retail fuel market. Although the transaction’s worth has not been revealed officially, insiders told Dawn at the time of the deal’s announcement last December that it was sealed for about $100 million.

To better understand the perspective behind this Aramco acquisition, Dawn recently had an exclusive email interview with Yasser Mufti, EVP of Products & Customers at Aramco.

Shedding light on the company — known as the largest crude oil exporter of the world — Mr Mufti explained the company’s bid to expand its global downstream operations, “Aramco has a well-established Retail presence, and, through its affiliates and investments, has a stake in more than 17,000 sites worldwide.”

The company is now striving to grow its retail presence in Saudi Arabia and globally. Acquiring GO in Pakistan is an important next step in this journey. Late last year, before Aramco’s acquisition of GO, media reports had said that Saudi

Aramco was considering a bid for Shell’s assets in Pakistan. That idea was seemingly dropped, and Royal Dutch oil company Shell reached an agreement with another Saudi firm, Wafi Energy LLC, to sell its 77.4pc majority stake in Shell Pakistan Limited.

Saudi Arabia has been Pakistan’s major crude supplier for decades, and Aramco looks at Pakistan as a growing energy market. “One of the primary drivers behind the entry into Pakistan (through the acquisition of GO) is the country’s rapidly expanding population and its corresponding increase in energy consumption.

“As Pakistan’s economy continues to develop, we expect that demand for reliable and affordable retail fuel will continue to rise. We are confident about meeting this growing need for retail fuels and securing a foothold in this promising market,” emphasises Mr Mufti.

“The synergies between Aramco and GO are expected to create exciting opportunities in Pakistan and will allow us to capitalise on new markets for our fuel products and unlock new market opportunities for Valvoline-branded lubricants,” he added.

On the issue of possible further investments in Pakistan, Mr Mufti said that at this stage, Aramco remains focused on ensuring a smooth and successful integration with GO. “Our top priority is ensuring a smooth entrance into the Pakistani market.”

He emphasised, “Whilst it is premature to discuss future plans, we do see Pakistan as a new dynamic market.”

On the subject of management control of the new entity with Aramco’s stake, Mr Mufti clarified that Aramco was aiming to focus on providing strategic insights and oversights rather than day-to-day operations. Conceding that the existing leadership of GO had deep domain expertise, he explained, “We look forward to learning from them as we work collaboratively to help drive sustainable growth and create value for our customers.”

It is evident that the company’s brand is part of the objective behind this investment. However, Mr Mufti did not want to commit to a specific timeframe for that. He remains confident that Aramco’s quality of products and services can provide ‘an enhanced retail experience for Pakistani customers’.

“The rollout of Valvoline lubricants will complement the planned introduction of the Aramco brand in the country. As a globally recognised leader in high-performance lubricants, Valvoline’s products will provide the quality and reliability that customers expect from the Aramco brand,” he asserted.

Rather than jumping into Pakistan in a big way, as some headlines had suggested, Aramco is playing safe. Acquisition of GO is the first baby step. One could assume that any further Aramco inroads into Pakistan would depend on the results and experiences gained from this ‘first’ step.

When Yasser Mufti says: “By establishing a presence in this emerging market, Aramco seeks to capitalise on Pakistan’s growing energy demands and position itself as a key player in the region’s energy landscape,” he was hinting at the experience to be gained from this investment before making a major move in the Pakistani market. To be fair, that is understandable. Much is seemingly dependent on the outcome of this experiment.

Published in Dawn, The Business and Finance Weekly, June 3rd, 2024