Saudi Aramco has formed a new fuel retailing company through it will create a network of gas stations in the kingdom, as it looks to consolidate and build its downstream portfolio.

Saudi Aramco Retail Company (RetailCo), Aramco’s new wholly-owned subsidiary, will trade automotive fuel at its own network of petrol stations in a move that will open up a “new and stable” source of revenue for the state oil company.

Aramco did not provide a timeline, size or value of the investment into the new retail firm, in its statement.

RetailCo will take a “phased approach” to expand its network of domestic fuel retail stations to cover the kingdom, Aramco said.

The formation of the new unit is the start of a series of initiatives and deals for RetailCo to become a “full-fledged” fuel retail segment of Aramco, the company said in its statement.

The venture into the retail fuel segment suggests that Aramco is looking to consolidate its sprawling energy business, and obtain more value out of every barrel of crude it produces by strengthening its downstream operations.

With Aramco stepping into the retail sector in its home market, competition in that space in the kingdom is set to grow.

Adnoc Distribution, the Abu Dhabi National Oil Company’s (Adnoc) retail unit, in December announced start of operations of its new chain of petrol stations in the kingdom.

Aramco’s move to set up a fully-owned fuel retail unit also comes at a time when the Saudi energy major is preparing to privatise 5 per cent of the company through an initial public offering (IPO).

As per the original plan announced by Crown Prince Mohammed bin Salman, which forms the centerpiece of Riyadh’s ambitious Vision 2030 programme, Aramco is to float shares of its downstream business and not offer a slice of its core upstream operations.

Establishing RetailCo under its downstream portfolio is suggestive of Aramco potentially considering floating shares of the unit as a way to achieve a stock listing of the whole company.

That would be similar to Adnoc's move in December 2017 when it went public on the Abu Dhabi Securities Exchange (ADX) with 10 per cent of Adnoc Distribution’s shares.