Saudi Arabia is planning to sell almost half of Saudi Arabian Oil, the world’s largest oil company, al Eqtisadiah reported.
A stake amounting to 49% will be sold within a decade, according to the Riyadh-based newspaper, which cites an unidentified senior government official. Deputy Crown Prince Mohammed bin Salman had given a statement in April that an initial public offering has been planned for the year 2018, or even a year earlier, with the country planning to sell less than 5%.
This move has resulted from the fact that Saudi Arabia has been under pressure due to lower crude prices. The share sale has been planned as a part of an effort to generate revenue and reform its economy. The government hopes to raise about $100 billion from the IPO of its flagship asset. Saudi Arabia’s Public Investment Fund will use the proceeds, and eventually control more than $2 trillion and help wean the kingdom off oil.
“Going from 5 to 49% is a huge jump but if you do it gradually over 10 years and in small chunks it is possible,” said John Sfakianakis, head of economics research at the Gulf Research Center in Riyadh. By doing so, the Saudis are planning their sources of revenue beyond ten years, in order to diversify their non-oil income.
The Saudi government relies heavily on oil sales for revenue, and its finances have taken a blow since prices started tumbling in 2014. Total projected revenue this year, at 528 billion riyals ($141 billion), is less than half what it collected in 2013, when oil was trading above $100 and made up 90% of revenue. Brent crude, the global benchmark, closed Friday at $55.16 a barrel.
Taking a company as large as Aramco to the market may pose challenges for Saudi Arabia. Selling any part of Saudi Aramco to the public will require “full audits and a large amount of transparency,” Paul Sullivan, a professor of security studies at Georgetown University in Washington, said by email on Saturday.
Source: Business Standard