Saudi prince’s ambitions tied to triumphant Aramco sale
RIYADH, Saudi Arabia — Saudi Arabia is expected to set a record for the largest stock flotation in history Wednesday with the sale of part of Aramco, the stateowned oil company valued at $1.7 trillion.
The offering’s success is crucial to the ambitious plan by Crown Prince Mohammed bin Salman to overhaul Saudi Arabia’s economy and wean it off its reliance on oil revenue for survival.
The company is looking to raise $29.4 billion from selling a 1.7% stake on the local Saudi exchange, making it the world’s biggest ever initial public offering. Prince Mohammed had envisioned an even bigger stock market debut for the kingdom’s crown jewel. The aim is to attract foreign investment to rapidly create jobs for millions of young Saudis entering the workforce as he prepares to inherit the throne.
The government has traditionally been the primary employer of Saudis, but lower oil prices, a budget deficit and a large young population mean the private sector must expand to absorb new entrants into the workforce to keep unemployment from rising beyond 12%.
The flotation is “a step in the right direction that will enable the crown prince to buildconfidencearoundAramco,” said Ayham Kamel, head of Eurasia Group’s Middle East division.
That could lead to confidence in the Saudi economy and generate billions of dollars in capital to invest in job-creating projects, analysts say.
What the crown prince had initially sought was a $2 trillion valuation for Aramco and the sale of up to 5% of the company — on an international stock exchange as well as the Saudi market — that could raise $100 billion.
Instead, potential buyers thought his $2 trillion valuation was too high. And the company ditched plans to list outside Saudi Arabia, amid headwinds including lower oil prices, heightened geopolitical tensions and climate change concerns.
In September, Aramco’s main crude oil processing plant and an oil field were struck by missiles and drones, knocking out about half of Saudi Arabia’s daily production or nearly 6% of global daily crude production. The U.S. and Saudi Arabia blame Iran for the attack. Iran has denied the allegations.
The attack underscored how Aramco’s stability and security is tied to that of the Saudi government and its ruling family, who also stipulate Aramco’s oil production levels.
Just Friday, OPEC and allies like Russia said they would cut oil production by 500,000 barrels a day to support prices. Saudi Arabia, OPEC’s heavyweight, said it would shoulder 40% of that cut and bring its daily production down by 200,000 barrels to 9.7 million barrels per day. Saudi Arabia’s deeper cuts could support Aramco’s valuation.
The company, which has exclusive rights to produce and sell Saudi Arabia’s oil, remains extremely profitable. It made net income of $111 billion last year, more than any other company globally. Profits were down for the first nine months of this year, but still rang in at a sizable $68 billion.