After regaining its position as the most valuable listed company in the world, Saudi national oil company Aramco is attempting to monetize one of its assets. Saudi officials have indicated that Aramco is currently discussing the option of listing its trading division Aramco Trading. Market analysts have already indicated that the IPO could hit around $30 billion. The move, which has been anticipated by many on the back of other energy-related IPOs in the GCC, would be a very smart way of taking advantage of the situation of high crude oil prices, high demand for petroleum products, and a global economy recovering from Covid. According to sources within the organization, Aramco has already contacted US financial institutions JP Morgan, Goldman Sachs, and Morgan Stanley about a potential listing of Aramco Trading. Aramco seems to be willing to sell around 30% of the arm. After the Aramco IPO, which was surrounded by mystery, geopolitical problems, and skepticism, and brought in $25.6 billion for 1.5% of the company Aramco, the company now is looking to monetize more. Even though Aramco has reported a record net profit and cash flow in recent days, more cash is needed not only for the upstream and downstream expansion plans of the oil giant, but also for the Saudi sovereign wealth fund Public Investment Fund (PIF), the main financial backer of the Kingdom’s economic diversification plans. Markets are also anticipating another Aramco share sale after Saudi Crown Prince Mohammed bin Salman openly indicated that more shares will be put on offer soon.
The Aramco Trading IPO, if it reaches the projected $30 billion, would be one of the biggest IPOs of 2022. Saudi optimism about the offering is not unfounded, with other IPOs in the sector this year, such as Korea’s LG Energy Solution, garnering plenty of interest.
Still, some skepticism exists, as putting a national oil company’s trading arm on the stock exchange could be tricky. Not many oil and gas producers are willing to open the books and market strategies of their trading companies to others. For a national oil company, the issue of transparency is even more worrying as insights into Aramco’s strategies and potential production volumes are closely guarded secrets. A potential listing is understandable, as the market is hot, but Aramco will have to practice caution.
The timing of Aramco’s announcement isn’t exactly surprising, after the news that Abu Dhabi’s national oil ADNOC is looking to bring a part of its downstream giant Borouge, together with Borealis, to the market. Interest in ADNOC’s offer is already high, with a vast revenue on the horizon. Launching energy-related IPOs at a time that oil prices are hovering above $100 per barrel, filling the wallets of NOCs, is hard to resist. These moves by ADNOC and Aramco could lead to more non-NOC related IPOs, as IOCs and independents are currently riding the same wave of interest, which is in stark contrast to recent years. The Russian invasion of Ukraine has put hydrocarbons (and their potential) back into the spotlight. It would also not be surprising if Aramco’s compatriot ADNOC considers a monetization strategy for its own trading arm ADNOC Global Trading.
Aramco Trading was founded in 2011 as a wholly-owned subsidiary reporting to the company’s Downstream division. ATC trades in everything from crude oil to LNG, according to its website. At present, ATC is grouped into a new unit, called Sales, Trading, and Supply which includes trading, crude marketing, shipping, and retail, and it also has some overseas units.
At the same time that ATC is making headlines due to a possible IPO, the unit has sold its first shipment of West African crude. ATC has assigned a million-barrel cargo of Equatorial Guinea’s Zafiro crude for early June loading to Exxon Mobil. It has long indicated that it wants to become a real global player, and now ATC is using the opportunity created by Russian trades being out of the market to enter the African market. West African crudes are considered to be a possible alternative to Russian crudes. Aramco has shown not to be blind to other Russia-linked opportunities as well, such as it entering into agreements in Moscow’s backyard, namely the Baltics and Poland. It is expected that ATC will also be looking at other European countries that are currently trying to end their Russian energy addictions.
By Cyril Widdershoven for Oilprice.com
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Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle… More