Saudi Aramco international IPO looks increasingly difficult

DUBAI: Saudi Arabia is increasingly looking to just float oil giant Saudi Aramco locally as plans for an initial public offering (IPO) on an international exchange such as London or New York hang in the balance, sources close to the process said.

The kingdom is counting on being awarded emerging market status by index complier MSCI in June to help Saudi Aramco attract Western funds, in addition to cornerstone investors from China, Japan and South Korea, the sources said.

“I would guess it is about evens that there will be no international IPO,” said a high-level source familiar with the preparations, saying they were proving to be a disappointment.

Saudi Arabia is planning to list up to 5% of Saudi Aramco in an IPO that could value it at up to US$2 trillion (RM7.8 trillion) and make it the world’s biggest oil company by market capitalisation.

Saudi Energy Minister Khalid alFalih said last week that Aramco was too important to risk listing in the United States because of litigation concerns, such as existing lawsuits against rival oil companies for their role in climate change.

British officials have been told by Saudi counterparts, London has a chance to secure the listing but only in 2019 at the earliest, according to the Financial Times, and sources told Reuters the kingdom was now focusing on a listing on the local exchange, or Tadawul.

“The only thing we know today is that Tadawul will be the key listing location as our national exchange,” Falih told CNN.

“We are waiting for the reforms to be in place and to join MSCI and Aramco listing in Tadawul will be catalytic for that capital market as we bring international capital to the kingdom,” he told the US channel last week.

The initial public offering is the centrepiece of Crown Prince Mohammed bin Salman’s plan to diversify the Saudi economy beyond oil and it would also boost the kingdom’s budget which has been hit by low oil prices.

Initially planned for 2018, preparations have been hit by rows over whether Aramco should list on major Western markets at all. An advisory council to the government asked the securities regulator this year to study the impact of a local listing amid concern a huge IPO could harm the market.

MSCI has proposed giving its existing Saudi Arabia stock index emerging market status rather than standalone status following a series of market reforms by the kingdom such as raising caps on foreign ownership of companies. – Reuters