Aramco IPO proceeds could help spur non-oil growth

KUWAIT: Saudi Aramco, the world’s most profitable company and biggest oil producer, is set to go public sometime in 2020 or 2021 in what is billed as the world’s largest initial public offering. Despite delays and devastating attacks on two of its key oil sites on September 14, the IPO remains the centerpiece of Saudi Arabia’s economic transformation and could raise some $100 billion to help usher in a new economy less dependent on oil.

With an oil production capacity of about 12 million b/d and posting a profit of $46.9 billion in the first half of 2019, Aramco is betting institutional investors will rush to buy the 5 percent stake set to be sold by the Saudi government.

Postponed last year for Aramco to absorb petrochemical group SABIC, the timing of the giant IPO remains unclear and hinges on market conditions, the oil price, and return to full production after the attacks, analysts believe. this IPO the banks would need advance notice that it is coming down the pipeline so they can set aside resources,” said Ellen Wald, president of Transversal Consulting and author of “Saudi, Inc.” a history of the Saudi oil industry. “Of course, the price of oil and the general strength of the equities market also play into timing,” she said.

More recently, signs are that Riyadh is moving move aggressively to bring the IPO to fruition.

Aramco’s chairman and energy minister, Khalid Al-Falih, was removed from his two posts in September. Yasir AlRumayyan, the head of Saudi Arabia’s $320 billion sovereign wealth fund, was appointed Aramco chairman, while Prince Abdulaziz bin Salman, the king’s son and an oil veteran with over 30 years’ experience in the industry, was named energy minister. With Rumayyan dropped into Aramco’s board in 2016 when the IPO was announced and the wealth fund tasked with investing the expected bounty from the listing, most observers see the separation of duties as designed to accelerate progress on the Aramco listing in London or New York.

For that reason, Aramco’s IPO is being closely watched by other NOCs as the region’s first national oil company to open itself to greater market scrutiny. While the UAE’s Abu Dhabi National Oil Company was the first NOC to list a unit in 2017, the company’s CEO Sultan al-Jaber has ruled out an IPO for the parent company. ADNOC Distribution was listed on the Abu Dhabi Securities Exchange and ADNOC has indicated it may list more units in the future.

“There is going to be huge interest in an Aramco IPO even if it is only because of the size and the novelty,” said Wald. Indeed, in addition to the integration of SABIC’s major petrochemical reach, Aramco is looking to grow its downstream and trading operations at a breakneck pace.

Market grooming

Aramco has already taken a series of steps to groom itself for the IPO. In March, it published earnings figures for the first time. The figures showed it to be the world’s but its giant near-term earnings potential, deep asset base and the integration of SABIC could be enough to win over most skeptics.

—Dania El Saadi is Assistant Middle East Editor,

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