Country Report Saudi Arabia May 2011

Economic performance: Aramco looks to strengthen ties with South Korea

In April, having signed two major downstream deals with Chinese state-owned companies in March (April 2011, Economic performance), Saudi Aramco, the state oil company, turned its attentions to South Korea-another leading Asian consumer of its oil. At present, Saudi Arabia supplies 30% of South Korea's crude oil imports, and Aramco also holds a 35% interest in S-Oil, a South Korean oil refiner. However, Aramco's interest lies more in the upstream sector, where it is keen on enlisting the support of Korean firms in building oil and gas projects in the kingdom.

Speaking on April 26th to a gathering of South Korean business leaders, Aramco's president and chief executive, Khaled al-Falih, expressed his desire for a more "forward-looking strategy" from South Korean companies, in which they would set up manufacturing and maintenance facilities in Saudi Arabia, rather than support their projects "over the horizon here in Seoul". The statement was made a day after Aramco's board of directors held its annual meeting in Seoul, probably to reinforce the message that it wishes to further strengthen energy links with the Asian nation. Last year, Aramco held a similar meeting of its board in the Chinese capital, Beijing. With Mr Falih announcing that Aramco is planning to invest some US$125bn over the coming five years, there will be ample opportunities for South Korean firms; a number have already been awarded engineering, procurement and construction (EPC) contracts totalling at least US$6bn in the past six months for strategic natural gas projects in the kingdom.

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