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Saudis Rethink Aramco IPO: Pure Oil & Gas or Conglomerate?

Saudi Oil

Saudi Arabian officials are debating whether the country’s flagship oil and gas company, Saudi Aramco, should be listed as an industrial conglomerate or a specialized international oil company ahead of its initial public offering scheduled to take place next year, according to a new report by Reuters.

"There are two options being studied now,” an anonymous source from the kingdom’s energy sector said. “Either to make Aramco a pure oil and gas company, or a conglomerate and expand its role in petrochemicals and other sectors.”

The IPO will be the largest in history, raising billions of dollars to support the KSA as it transitions from an energy dependent economy to one with more diverse prospects by the year 2030.

Released last year, the Vision 2030 plan vowed to “transform Aramco from an oil-producing company into a global industrial conglomerate,” but senior-level officials are now concerned with the complications this would create in valuing the state-run corporation ahead of its partial sale.

Listing it as a specialized company instead would smoothen the process and potentially push per-share prices upwards.

Reuters’ attempt to contact Aramco regarding the matter yielded a “no comment.”

Over the past couple of years, Aramco has entered into contracts with General Electric for a shipbuilding and renewable energy companies for new solar and wind energy ventures. Executives are concerned the newer add-ons will not be of interest to the foreigners they project will purchase Aramco shares. As a result, a faction of those planning the IPO contend that all projects unrelated to oil and gas operations should be placed in a separate entity before shares are sold.

"It is going to be a legal nightmare for them. And the more they dig, the more they find out issues they need to sort out," an industry source said.

By Zainab Calcuttawala for Oilprice.com

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  • Bonaventure Stephen Gomes on February 19 2017 said:
    With a service span of 35+ years with Saudi Aramco (then Aramco), Saudi Aramco (or Aramco) is different. From drilling a hole on the wall to drilling a hole in the ground, the Company contracts all services and projects. Saudi Aramco (or Aramco) cannot be placed in the same league as other international oil producing majors like Exxon-Mobil, Shell, Total, or BP that have expanded their operations across the globe. Saudi Aramco (or Aramco), as compared to the oil majors, does not have the domain expertise to explore in other parts of the world. Their expertise lies in project management or Build-Operate-Lease-Transfer (BOLT) or combinations thereof. Joint Ventures (JVs) have been the norm in downstream operations with oil as fodder for stake in these JVs. Upstream operations have been limited to their geographical boundaries. JVs or tie-ups do not exist among the GCC nations. Saudi Aramco (or Aramco) is a cash cow churning large revenues from sale of crude oil, gas, and recently, chemicals. Simply put, it is an oil company driven by its resources derived from the ground (onshore) or from the seas (offshore).

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