Saudi plans several options for Aramco
RIYADH: Saudi Arabia is considering two options for the shape of Saudi Aramco when it sells shares in the national oil giant next year - a global industrial conglomerate, and a specialised international oil company, industry and banking sources said.
The listing of Saudi Aramco, expected to be the world’s biggest initial public offer and raise tens of billions of dollars, is a centrepiece of the government’s ambitious plan — known as Vision 2030 — to diversify the economy beyond oil.
When the plan was publicly released in June last year, it pledged to “transform Aramco from an oil-producing company into a global industrial conglomerate”.
But now Saudi officials and their advisers are debating whether to make Saudi Aramco “a Korean chaebol”, as one source said, referring to sprawling South Korean conglomerates, or a specialised company focused purely on oil and gas.
A specialised company might be easier to value because of its simplicity and, since the risks in its business would be clearer, achieve a higher price for its shares.
Two options
“There are two options being studied now. Either to make Saudi Aramco a pure oil and gas company, or a conglomerate and expand its role in petrochemicals and other sectors,” said a Saudi industry source, declining to be identified because the debate is being conducted in private.
An Aramco spokesperson said: “Saudi Aramco does not comment on rumour or speculation.”
Other than its core oil and gas production, exploration and refining businesses, Saudi Aramco — which employs more than 55,000 people — has plans to build solar and wind power facilities.
Ship repair facility
As the Kingdom’s biggest company and one of its most efficient, it is being pressed into service to jump-start industrial projects that are too big or daunting for the private sector.
It is developing a $5 billion ship repair and building complex on the east coast, and working with General Electric Companyw on a $400 million forging and casting venture.
It has also often been tasked with executing government projects that have social goals, such as building industrial cities, stadiums and cultural centres. It was involved in creating the King Abdullah University of Science and Technology.
Clean-up exercise
As the IPO approaches, officials are asking themselves whether the domestic and international investors who will be asked to buy Saudi Aramco shares really want exposure to such a complicated array of assets.
A banking source familiar with the IPO preparations said the government was studying a “clean-up exercise” to make Saudi Aramco’s structure neater.
One option under study is moving all businesses not related to oil to a separate entity before the IPO, although this would be a complex process, the sources said.