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Aramco Could List Downstream Business

Aramco downstream assets

As Oilprice.com writer Cyril Widdershoven predicted in an October 2 article, Saudi Aramco is considering the listing of its downstream operations after it completes the acquisition of a sizeable stake in petrochemicals giant Sabic, according to CNBC reports, citing unnamed strategists. However, some are concerned a spinoff and listing of the downstream operations would compromise Aramco’s attractiveness to investors who would rather buy into an integrated oil company.

Plans to acquire 70 percent in Sabic from the Saudi sovereign wealth fund surfaced earlier this year, with reports saying Aramco would have to borrow a substantial sum to make the deal, worth US$70 billion.

“The first step will be completing the acquisition of the 70 percent of SABIC held by PIF and integrating that into Aramco’s petrochemical opezrations. That will be a lengthy and complicated business given the size of SABIC,” former Shell executive Robin Mills told CNBC. “After that, yes, there could be an offering of additional stock in a merged downstream unit either on Tadawul (Saudi’s stock exchange) or an international exchange. This would sidestep many of the concerns on listing the full company over transparency, reserves, political exposure, sensitivity to oil price, country exposure and the large size of the unit.”

However, the CNBC report comes on the heels of a statement by Aramco’s chief executive, Amin Nasser, that the initial public offering of the company was still on, only it would likely take place in 2021. Saudi Arabia’s government is currently “suggesting 2021 for IPO listing, depending on market conditions at that time,” S&P Global Platts quoted Nasser as saying at the ADIPEC conference in Abu Dhabi.

The listing of Aramco has encountered multiple potential problems, including the lofty US$2-trillion valuation that the Saudis were hoping for, the estimate of Saudi Arabia’s oil reserves that is shrouded in secrecy, and the international venue for the IPO. Aramco’s listing plans quickly slipped from ‘definitely by the end of 2018’ early this year to ‘indefinitely postponed’ this summer.

By Irina Slav for Oilprice.com

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