Aramco floatation considered by Saudi Arabia

Saudi Arabia is planning to sell shares in State energy giant Saudi Aramco, world’s largest oil producer, creating Trillion Dollar company. In an interview in the Economist, deputy crown prince Mohammed bin Salman said the move was being “reviewed and the decision could be months away”. Prince Mohammed has become Saudi Arabia’s main powerbroker after his father, King Salman, ascended to the throne last year. Last May, the king split Saudi Aramco from the oil ministry, bringing the company under the aegis of Prince Mohammed, a definite sign of 30-year old’s growing clout.

Aramco which produces more than 10 million barrels of oil per day, three times as much as the ExxonMobil world’s largest listed oil company, has crude reserves of about 265bn barrels – more than 15% of global deposits- and with falling prices a sale would raise revenues for Saudi as the government has a deficit of £68.4bn $100bn due to the collapse in oil price over the last 18 months. He favoured listing Aramco shares on the stock market.

Although he did not speculate how much of the company could be sold, but analysts estimates that a full listing would be worth over £684m, $1 Trillion. The world’s current most valuable company is Apple worth £371.41bn, $543bn.

Bankers have said the floatation would likely to start with the petrochemicals or refining divisions- or selling shares in the parent company which include oil production. However, on official has suggested that in the past that any entity floated would have to be majority owned by Saudi government. Saudi government signed an oil concession agreement back in 1933 with the Standard Oil company of California, managed by the subsidiary the California Arabian Standard Oil Company, allowing SoCal to explore for oil in Saudi Arabia, and five years later oil was discovered at the seventh drill site Dammam well No.7. Aramco’s owners now include SoCal, Chevron Corporation (then Texaco) and ExxonMobil (then Standard Oil of New Jersey and Socony-Vacuum. In 1950, The Safaniya filed, world’s largest offshore oilfield, was discovered to exceed over a million barrels oil production a day. By 1974 Saudi government owned 60 per cent stake in Aramco and complete takeover in 1980. By 2009 oil production was boosted to 12 million barrels per day.