The listing of Saudi Arabia’s energy giant Aramco is on track to take place in 2021, Energy Minister Khalid al-Falih said, echoing earlier assurances he and Aramco’s chief executive made over the past year.
In January, Al-Falih said the company will issue an international bond in the second quarter of this year, mostly to fund the acquisition of a majority stake in petrochemicals major Sabic, valued at US$70 billion, but also to tap “multiple sources of capital.”
Given Aramco’s reluctance to make any of its accounts public, as befits a company preparing for a listing, many were skeptical that the bond will take place, since international bond investors are just as interested in a company’s financial health as stock investors. Yet Riyadh has been insistent both the bond and the listing are going as planned.
“With or without the SABIC transaction a company the size of Aramco - its capital program and its capital spend is going to be from $40 to $50 billion a year - it’s very prudent they have access to the capital market,” Falih also said in January.
Apparently, with or without the Aramco IPO, the company is looking to expand internationally as well.
“We are no longer going to be inward-looking and focused only on monetising the kingdom’s resources. Going forward the world is going to be Saudi Aramco’s playground,” Al-Falih told the Financial Times in February. “If I have investors from New York or London or Tokyo that are investing in Saudi Aramco they want Saudi Aramco to be competing with the world’s best international oil companies,” Al-Falih also said at the time.
The now notorious Aramco IPO was shelved indefinitely last summer, but in November the company’s CEO, Amin Nasser, said it was going to happen, most likely in 2021, market conditions permitting. He added, however, the listing was contingent on Aramco’s acquisition of Sabic.
By Irina Slav for Oilprice.com
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Nothing has changed since the original IPO was withdrawn. American litigation still hangs like Damocles Sword over the neck of Saudi Arabia and question marks persist about the real size of Saudi proven oil reserves despite a so-called independent audit claiming that Saudi oil reserves amount to 270 billion barrels (bb). It transpired, however, that the claim was neither independent nor unbiased since the companies that conducted the audit (DeGolyer, MacNaughton, and Baker Hughes’ Gaffney, Cline, and Associates) have or have had service contracts with Saudi Aramco.
Still the announcement by Mr Al-Falih aims to encourage international bond investors to participate in the international bond Aramco is planning to issue in the second quarter of this year, mostly to fund the acquisition of a majority stake in petrochemicals major Sabic valued at US$70 billion.
It is possible, however, that what the Saudi oil minister had in mind is an IPO of Aramco’s downstream assets (petrochemicals and refining) but never an IPO of Saudi Aramco per se that includes upstream assets. Investors can see the assets of petrochemicals and refineries but they can’t see reserves until they are absolutely confirmed by a truly independent auditing body. Still when the time comes for a downstream IPO, Saudi Aramco may decide to kick the tin further down the road.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London.