Aramco IPO to offer stake in all operations, chief executive says

The world’s biggest oil company is planning to sell shares in the entire business and not just in its refining or distribution operations, its chief executive said.

Saudi Arabian Oil Co, known as Saudi Aramco, will announce “very soon” a list of investment banks and consultants advising it on the initial public offering, its chief executive Amin Nasser said, without specifying a date. It plans to list shares on the Saudi stock market and is also considering foreign bourses in London, Hong Kong and New York, he said. Aramco’s plan to sell a stake of about 5 per cent could value the company in trillions of dollars.

“We need to do a lot of internal work to prepare for this listing,” Mr Nasser said. “We are listing a part of the entire company, and not just downstream,” he said, referring to operations including refining and distribution.

Saudi Arabia, under pressure from lower crude prices, wants to sell shares in Aramco in early 2018 as part of an effort to generate revenue and reform its economy. The government hopes to raise about US$100 billion from the IPO of its flagship asset. The planned sale, which the deputy crown prince Mohammed bin Salman announced in April, could be the world’s largest share offering.

“There are no obstacles for the IPO of Aramco,” Mr Nasser said. “It’s going very smoothly, and we are on target. We achieved a lot of progress so far. People have to appreciate the size of Aramco and its complexity.”

The company will review its budget “shortly,” he said. “Our spending programme is active and evolving.”

Saudi Arabia is producing oil at near record highs, with output of 10.5 million barrels a day last month. Aramco cut pricing on Wednesday for its November crude sales to Asia and Northwest Europe and for most of its grades to other regions, in a contest for market share amid a global supply glut.

“We are one of the few companies that is still investing. We will continue to invest in our core business. Our rigs are increasing, and our overall activities are increasing.”

Opec, of which Saudi Arabia is the largest producer, agreed last week in Algiers to trim output for the first time in eight years after crude prices dropped to about half their levels in 2014. Oil ministers from both Opec and non-Opec producers are to meet next week in Istanbul for talks on how to put the cuts into effect.

“Saudi Aramco still sees opportunities and is utilising this down cycle to grow its business, especially in the downstream sector and in gas, where we are expanding quickly,” Mr Nasser said.

The company seeks to double its total production capacity for natural gas, including shale gas, from 12 billion cubic feet per day over the next 10 years, he said.

“Gas is very important to fuel industries, especially in the petrochemical sector,” Mr Nasser said. The use of gas in power- generation and manufacturing also frees up more crude oil for export, he said.

Aramco plans to start producing shale gas in late 2017 from the Wa’ad Al Shamal project in the country’s northwestern region. In 2018, it will begin producing at the Al Jafurah basin in the kingdom’s Eastern Province, Mr Nasser said.

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