Saudi Arabia is finalizing the partial IPO of state oil firm Aramco.
Saudi Arabia's state-owned oil giant Aramco is finalizing proposals for its partial privatization and will present them to its Supreme Council soon, its chief executive said about the centerpiece 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 percent of its value, which include a single domestic listing and a dual listing with a foreign market, CEO Amin Nasser said on Tuesday. 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.
Saudi Arabia, the world’s largest exporter of crude oil, is already pumping at near-record levels of about 10.2 million barrels a day. That output was part of an overall Saudi strategy for dealing with oil prices that collapsed more than 70% from June 2014 to January 2016: Pump flat out and compete with other countries for crude buyers. The country no longer regulates its production levels to keep global supply and demand in balance and stabilize prices. Mr. Nasser’s comments suggest the kingdom’s oil company isn’t changing course. Saudi Arabia’s output tends to increase in the summer to deal with rising air-conditioner use when temperatures in the kingdom reach scorching levels, but Mr. Nasser said Aramco would pump more to meet demand elsewhere, particularly in the U.S. and India.
Saudi Aramco controls about 10% of the world's oil output. Its record-breaking stock market listing is expected to value the company at $2.5 trillion. The initial public offering is scheduled for next year or 2018. The Saudis are trying to persuade ExxonMobil, China's Sinopec, and BP to take stakes in the listing, offering them long-term access to deals in exchange. On Tuesday the company is holding a meeting to outline its rapid growth plans. CEO Amin Nasser says the group is hoping to add another 500,000 jobs to the economy, according to the BBC's Simon Jack, who was live tweeting the board meeting at the time of this article's publication.