This Oil Nation Is Committing $1.5 Billion To The Aramco IPO

Abu Dhabi could invest up to US$1.5 billion in the initial public offering of Saudi Aramco, Bloomberg reported on Tuesday, citing people familiar with the matter.

Saudi Arabia now relies on nearby friends to bring home a success in the world’s largest listing ever, after seeing that foreign investors are not exactly rushing to buy into its giant oil company.

The oil-rich emirate of the United Arab Emirates (UAE) is preparing to invest in Saudi Aramco via one or more state-controlled entities, Bloomberg’s sources said. Officials from Abu Dhabi and Aramco are meeting this week to hammer out a potential agreement about the emirate’s investment.

Saudi Arabia will be offering up to 0.5 percent in Aramco to retail investors, while in total the Kingdom plans to list 1.5 percent of the company on the Saudi stock exchange, the Tadawul, as early as in early December.

The Saudis, however, have had a bitter pill or two to swallow in the IPO process. First, the valuation of Aramco appears to be some US$300 billion lower than the coveted US$2-trillion valuation.

Last week, Aramco set an indicative price range of 30-32 Saudi riyals, (US$8-8.52), in its long-awaited initial public offering, which would give the company a total value of some US$1.7 trillion.

And second, foreign fund managers have not been too keen to invest in the Saudi oil giant, even if it is the world’s most profitable oil company.  

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China could invest in Aramco’s IPO, potentially boosting the ties between the world’s top oil exporter Saudi Arabia and the world’s top oil importer China. Russia, however, doesn’t plan a big investment, if at all. The Russian sovereign wealth fund will not make a huge investment, although some Russian funds believe that the Saudi oil giant is an attractive investment, the fund’s CEO Kirill Dmitriev said last month.

Norway’s US$1.1 trillion Government Pension Fund Global—the world’s biggest sovereign wealth fund—is not even thinking of pouring money into Aramco.

Last week, Malaysia’s state oil company Petronas, which Aramco was courting as a large investor, said it had decided against the investment, in another blow to the Saudi hopes for large investors underpinning the biggest IPO ever.

By Tsvetana Paraskova for Oilprice.com

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