Saudi Aramco set for IPO worth up to US$3trn

SAUDI ARABIA will list up to 5% of Saudi Aramco in a deal that would value the state oil firm at between US$2trn–3trn, as the country seeks rapid economic diversification.

The plan was announced yesterday by Deputy Crown Prince Mohammed bin Salman and is part of a wider national strategy titled Saudi Vision 2030, aimed at reducing the country’s dependence on oil. Saudi Arabia has been hit badly by the fall in oil prices, recording a US$98bn budget deficit last year.

In an interview with state channel al-Arabiya, Prince Mohammed declared the country’s addiction to oil is dangerous and said it could end its reliance within four years.

“In 2020, I think we will be able to live without oil,” he explained. “We will need it but we can live without it.”

Transparency will be a key benefit of Saudi Aramco’s public listing said Prince Mohammed. The move would require the company’s new elected board to disclose more details about its finances and reserves production. Once the IPO is complete, ownership would transfer to a public investment fund, becoming the world’s largest sovereign wealth fund, worth up to US$3trn with the goal of diversifying the economy.

To understand the scale of the deal, Saudi Aramco’s IPO would value the company up to five times higher than Apple, the world’s current largest company by market capitalisation. Its oil reserves at 260bn bbl are almost ten times higher than those of ExxonMobil.

The IPO could take place in the next six to nine months, said Prince Mohammed. Some commentators have speculated that the company will list its refining and petrochemical businesses but not its production assets.

The wider plan for diversification sees the government’s non-oil revenue climbing from SR163bn (US$43bn) today to SR1trn by 2030. Structural reforms are set to spark exploration and extraction of the country’s relatively untapped wealth of minerals including uranium, gold and phosphate. The prince described its 6% of global uranium reserves as “another oil that we have not exploited”.

As the world’s third-largest military spender, a target has been set to boost domestically-sourced technology from just 2% today to 50% by 2030.