Saudi Arabia Mulling IPO Of State-Owned Saudi Aramco…

In an interesting but perhaps not surprising move, the government of Saudi Arabia has revealed that it is currently mulling the idea of publicly listing the state-owned oil company Saudi Aramco.

Going by an interview with the kingdom’s deputy crown prince, Muhammad bin Salman, conducted by The Economist, the final decision on the matter is expected to be made within only a few months time.

“Personally, I’m enthusiastic about this step,” he stated in the interview. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco.”

The Economist provides more:

The prince has held two high-level meetings recently on the possibility of floating Saudi Aramco shares. Officials say options under preliminary consideration range from listing some of its petrochemical and other “downstream” firms, to selling shares in the parent company, which includes the core business of producing crude.

Officials say Saudi Aramco is worth “trillions of dollars”, but it is one of the world’s most secretive oil companies and reveals no information on revenues and offers only limited information on its hydrocarbon reserves. Prince Muhammad says that a listing would make the company more transparent. Diplomats say investors are already being sounded out. The talk is of first floating part of the company in Riyadh — perhaps 5%. In time that could rise, though the kingdom would continue to exercise control over the company.

While Saudi Aramco’s reserves are claimed to be around 261 billion barrels, it’s not clear how accurate this number is, as the company is quite secretive. If the numbers are accurate, then that puts the company’s reserves roughly 10 times higher than those of ExxonMobil.

As the Economist notes:

Since Prince Muhammad became head of the defence ministry, and the Council for Economic and Development Affairs, just over a year ago, the country’s geopolitical swagger has been coupled with plans for sweeping economic change at home. These plans include gradually eliminating subsidies on electricity, water and housing; seeking private-sector provision in health care and education; introducing a 5% value-added tax on non-essential goods; and studying the complete or partial privatization of over two dozen agencies, including the national airline and telecoms firm. Asked if Saudi Arabia was undergoing a “Thatcherite revolution”, Prince Muhammad replied: “Most certainly.”

It should probably be stated here bluntly that Saudi Arabia currently appears to be experiencing financial problems. Despite claims that the country possesses a sovereign wealth fund of around $650 billion, the actual financial situation of the country is really something of a mystery. Given that the current compliance of most of the country’s population is down to the subsidization that is now being eliminated, one would presume that that’s not a measure that would be taken unless necessary. Though, cluelessness and arrogance amongst long-established elites is a constant of history (as many famous Arabic historians have themselves noted), so who knows?

It should also be noted here that, despite the relative media blackout on the subject, things don’t appear to be going well with regard to the Saudi intervention in Yemen — with solid reports emerging that militias have been regularly making successful raids against military bases in Saudi territory in recent days.