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What Can We Expect From A Saudi Aramco IPO?

Muhammad bin Salman, the Kingdom of Saudi Arabia’s (KSA) Deputy Crown Prince, has publicly stated his personal support for selling shares to the public in Saudi Aramco.

Saudi Aramco Not Likely To Include Petroleum Reserves In An IPO

Khalid al-Falih, the Saudi Aramco Chairman, stated at the Davos conference last month that any offering would not include the company’s oil reserves. Not including any reserve information in a public offering means that the number shown in the Organization of Petroleum Exporting Countries (OPEC) data will continue as the KSA’s official public estimate of its oil reserves.

Any Saudi Aramco public listing appears likely to include downstream and some exploration and production assets in the company.

Related: Global Oil Production On Pause, But Decline Seems Imminent

How Much Oil Does Saudi Arabia Own?

The official OPEC report states that at year end 2014 the KSA had proven crude oil reserves of 266.58 billion barrels. The Society of Petroleum Engineers defines “reserves” as “the quantities that remain to be commercially produced as of a given date, under stated economic and operating conditions.”

No Twilight In KSA Desert Anytime Soon

Matthew Simmons generated significant controversy with the publication of “Twilight in the Desert” in 2006. The book prompted significant global debate around the concept of Peak Oil – a debate which has largely been settled with the unconventional tight oil revolution that demonstrates the paradigm changing opportunity that best in class technology and practices has brought to the exploration and production of oil and gas.

Related: The $2 Trillion Gift From Oil Companies To Consumers

How Much Oil Can Saudi Arabia Export?

While estimates of ultimate petroleum recovery affect geopolitical and financial analysis of individual oil producing countries, the ability to export oil is a more significant driver of prompt global price. The KSA continues to internally consume a large percentage of its crude oil production. Some analysts believe that austerity measures in the KSA and slower economic growth generally in oil exporting countries will slow internal consumption, thus yielding a relatively higher percentage of future produced crude available for export than forecast in earlier years.

The KSA has aggressively invested in downstream assets in North America to ensure long-term access for its crude oil exports. The KSA plans additional investment in downstream China assets as it fights for market share with Russia and other exporters.

Related: Russia So Desperate It Could Sell Off State-Owned Oil Assets

What Is The Future Of Saudi Arabia?

The KSA is currently undergoing more socioeconomic and economic change than any time in recent history. The substantial ongoing war and political violence throughout the Middle East has introduced a level of uncertainty to geopolitical assumptions regarding the future of the KSA.

While taking shares in Saudi Aramco public will reveal greater economic transparency regarding assets tied to the share offering, not including any oil reserves means that reserve analysis will continue to look to self-reported data from OPEC and the KSA itself to estimate total global hydrocarbon reserves and estimate ultimate recovery.

By Tom Morgan via DrillingInfo

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