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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Saudis To Retain Full Control Over Aramco’s Oil After IPO

Saudi oil field guards

Saudi Arabia will continue to have full control over the oil wells and production of Aramco, after the much-anticipated initial public offering of around 5 percent of the Saudi oil giant next year, Deputy Crown Prince Mohammed bin Salman said on Tuesday.

“The wells will still be owned by the government. The company only has the right to benefit from the wells. This is the same as before and there are no changes to that,” said the prince on state television, as quoted by Bloomberg.

As for production levels, they will continue to be subject to the OPEC policies and global supply and demand, the prince noted.

According to Financial Times, Mohammed bin Salman said on Saudi television that “production is not a political decision, it is an economic one set by supply and demand.”

The prince also described the local Saudi criticism to the IPO plan as “socialist, communist thinking”, and defended the project as vital for Saudi Arabia’s efforts to diversify away from oil.

The deputy crown prince has said that Aramco’s value could be US$2 trillion, which means that 5 percent would fetch US$100 billion for the Kingdom. But since the staggering US$2-trillion valuation was first aired, institutional investors, fund managers, and industry professionals have been trying to find valuation metrics that add up to this figure. Related: The Return Of Bearishness In Oil Markets

Analysts are mostly valuing Aramco at below US$1.5 trillion, although Saudi Arabia slashed the tax rate on Aramco to 50 percent from 85 percent in a bid to attract international investors and raise the company’s value. The tax rate cut is making the oil giant more attractive to investors, and raises the valuation of its upstream portfolio by around US$1 trillion, according to Rystad Energy.

Most recently, a Wall Street Journal report suggested that officials at Aramco are applying internal value estimates of US$1.3 to US$1.5 trillion to the valuation, calling deputy crown prince’s estimate “unrealistic and mind blowing.”

By Tsvetana Paraskova for Oilprice.com

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