Saudi Aramco Finalises IPO Options

Source: Oman Observer 5/13/2016, Location: Middle East

Saudi Arabia’s state-owned oil giant Aramco is finalising proposals for its partial privatisation and will present them to its Supreme Council soon, its chief executive said about the centrepiece of the kingdom’s efforts to overhaul its economy.

The company has a huge team working on the options for the initial public offering (IPO) of less than 5 per cent of its value, which include a single domestic listing and a dual listing with a foreign market, CEO Amin Nasser said. They will be presented “soon” to Aramco’s Supreme Council, headed by Deputy Crown Prince Mohammed bin Salman, who is leading an economic reform drive to address falling oil revenue and sharp fiscal deficits by boosting the private sector, ending government waste and diversifying the economy.

Nasser stressed that even after the listing, the Saudi government would retain sole control over Aramco’s oil and gas output levels. “Production is sovereign,” he said.

Riyadh has traditionally kept an expensive “spare cushion” of excess production capacity, allowing it to raise or reduce levels to influence prices according to the government’s market strategy. Private oil companies, by contrast, do not hold back output for strategic gain.

Nasser also said Aramco was seeking to expand globally via joint ventures in Asia and North America. “We are looking at the current market status that, even though challenging, is an excellent opportunity for growth,” Nasser said, adding that he was looking at opportunities in the United States, India, Indonesia, Vietnam and China. The CEO was speaking to reporters during a rare media visit to the company’s extensive, well-guarded Dhahran headquarters, located near where American oilmen first struck the Arabian Peninsula’s enormous crude reserves at Well Number 7 in 1938.

Besides proposing to sell a stake in the company, which would require it to release sensitive reserves data, Riyadh has asked Aramco to play a big role in developing industrial projects aimed at stimulating non-oil economic sectors. Last month, Prince Mohammed said he expected the IPO would value Aramco at least $2 trillion, but that he thought the figure might end up being higher. Any valuation would account for both oil price expectations and the size of Saudi Arabia’s proven oil reserves.

GROWING DEMAND: Company officials said Saudi Arabia had discovered a total of 805.6 billion barrels of oil, of which 141.5 billion had already been produced and 260 billion barrels were considered “proven”, the industry term for reserves that can definitely be extracted.

Aramco also had 403 billion barrels of reserves it could probably extract, they said, adding that it hoped to add another 100 billion barrels to total reserves by 2025 by increasing the recovery rate by 50-70 per cent using new technology.

Aramco expects global crude oil demand to grow by 1.2 million barrels per day this year, he said, and has seen increasing demand in the United States and India.

“We will meet the call on Saudi Aramco,” Nasser said, adding that the company will increase capacity in future if needed, but that for the time being its maximum sustainable capacity would stay at 12 million bpd, with total capacity of 12.5 million bpd.

Saudi Aramco produced an average of 10.2 million bpd of crude in 2015, he said, adding there had been a big drop in oil output among non-conventional and even other conventional producers.


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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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