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RBC Capital Markets: Aramco Shake-Up Aims To Fast Track IPO

Riyadh by night

The change of the chairman of oil giant Saudi Aramco is paving the way for fast-tracking the listing of the world’s biggest oil firm, as Saudi Arabia’s Crown Prince Mohammed bin Salman wants, Helima Croft of RBC Capital Markets told CNBC on Tuesday.

Saudi Energy Minister Khalid al-Falih has lost his role as chairman of the board for Saudi Aramco, al-Falih announced on Twitter Monday, amid a broader shake-up in Saudi Arabia’s key energy roles.

Saudi Arabia will split its Energy, Industry, and Mining Ministry, with the current minister, al-Falih, remaining at the helm of energy policies. Industry and mining will be the prerogative of a new minister, to head a new ministry.

Al-Falih will step down from his role as chairman in Aramco’s attempt to avoid a conflict of interest in the runup to its much-hyped, much-anticipated IPO. Now Aramco will be officially separated from the Ministry of Energy.

The switch in Aramco leadership to the head of the Public Investment Fund, “is about Mohammed bin Salman taking control of Aramco and really propping it for IPO, again, on a very fast timeline,” RBC’s Croft told CNBC.

The broader shake-up at the energy and mining ministry and at Aramco signals that the Saudi leadership wants the IPO done quickly and wants people who are very supportive of this process, Croft added.

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“There’s now sense of urgency and the fact that the bond issuance went better than expected, I think that has given the leadership the sense that they can do it this time,” she said.

Aramco is ready for listing, but it will be the company’s only shareholder, the Kingdom of Saudi Arabia, that will decide when the IPO will take place, the world’s largest oil producing firm said last month.

Initially announced in 2016, the plans for Saudi Aramco’s listing have faced multiple delays and various stumbling blocks, including a US$2-trillion valuation that the Saudis are hoping for, the estimate of Saudi Arabia’s oil reserves that has been shrouded in secrecy, and the international venue for the IPO.  

Mohammed bin Salman is reportedly still holding fast to the notion that Saudi Aramco should be valued at US$2 trillion, while analysts remain skeptical that the world’s largest oil company is truly worth that much.

By Tsvetana Paraskova for Oilprice.com

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