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Aramco, Alphabet Discuss Joint Tech Hub In Saudi Arabia

Saudi Arabia’s state oil giant Saudi Aramco and Google’s parent company Alphabet have entered into talks about potentially building a big technology hub in Saudi Arabia, The Wall Street Journal reported on Thursday, citing people familiar with the discussions.

Alphabet and Aramco are discussing a joint venture under which the Silicon Valley giant will help the Saudi oil group to build data centers in Saudi Arabia, but it was not immediately clear whose data the centers would host or who would control them, according to WSJ sources.

Senior managers at Alphabet and Aramco have been discussing the creation of a potential joint venture for months, and those talks have included Alphabet’s CEO Larry Page, some WSJ sources said.

The talks have been encouraged by Saudi Arabia’s Crown Prince Mohammed bin Salman, who is a technophile and wants to give the Kingdom a high-tech look.

The Crown Prince is also the Saudi official supervising the plans for the initial public offering of Aramco, set for the second half of this year and expected to be the world’s largest IPO in history. Saudi Arabia aims to diversify its economy away from oil with the proceeds from the listing of 5 percent of Aramco, which—if the Saudi valuation for the entire company at $2 trillion stands—could bring the Kingdom $100 billion.

Related: The Oil Rally Is Helping Renewables

A possible deal with Google’s parent company could further help Saudi Arabia’s diversification from crude oil and toward the Crown Prince’s high-tech ambitions.

Last month, Reuters reported that two other Silicon Valley giants—Amazon and Apple—are in licensing talks with Saudi Arabia to invest in the Kingdom. While both Apple and Amazon sell products in Saudi Arabia via third parties, they have yet to set up direct presence there. Apple is reportedly in talks with the Saudi Arabian General Investment Authority (SAGIA), and a licensing agreement for Apple stores is expected by February, with a first retail store targeted for 2019. Amazon is in an earlier stage of talks with no set date for setting up a presence, two sources familiar with the talks told Reuters.

By Tsvetana Paraskova for Oilprice.com

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