The world’s most valuable company isn’t Apple or Google’s owner, Alphabet. It’s an outfit in a league of its own: Aramco, as Saudi Arabian Oil Co is better known. This sprawling state-owned producer, sitting atop one-fifth of the globe’s petroleum reserves, pumps more crude than the top four publicly traded oil companies combined. It’s valued at more than $2tn — or about four times the biggest technology giants — though no one really knows what it’s worth because its profits are shrouded in secrecy. The veil could soon be lifted as the Saudi government is planning a partial privatisation of Aramco to create a war chest and prepare the country for the post-hydrocarbon age.

The Situation
The government intends to sell up to 5% of Aramco in 2018, most likely in the second half. The sale’s estimated size of about $100bn would make it the biggest-ever initial public offering, dwarfing the $25bn raised by Chinese Internet retailer Alibaba in 2014. Bankers are lining up to reap a bonanza of fees. Proceeds from the Aramco sale would bulk up a sovereign wealth fund at the centre of a drive to diversify the economy, a goal that’s gained urgency since the price of crude tumbled from more than $100 a barrel in 2014 to about half that level. Deputy Crown Prince Mohammed bin Salman’s drive to create jobs for millions of unemployed Saudis in manufacturing, tourism and other fields is seen as crucial to the kingdom’s economic planning. The company will face unprecedented scrutiny: Disclosures needed to trade Aramco shares on overseas exchanges may include the first independent audit of the kingdom’s reserves and details about its production capacity. Aramco is considering selling shares in London, New York, Tokyo, Hong Kong or even Canada, as well as the domestic market. Chief executive officer Amin Nasser says the company may list on two or three exchanges and, to make the sale more attractive to investors, Saudi Arabia will reduce the company’s overall tax rate.

The Background
Explorers from the Rockefeller family’s Standard Oil empire first struck oil in Saudi Arabia in 1938. The venture became known as Arabian American Oil and went on to discover Ghawar field, still the world’s largest onshore deposit. In 1980, the Saudi government bought out the original shareholders, all of them forebears of Exxon Mobil or Chevron, and renamed the company. Aramco has fuelled decades of prosperity for Saudi Arabia. It generates almost 90% of government income and built the refineries, petrochemical plants and other infrastructure that form the backbone of the world’s 15th-biggest economy. Saudi Arabia has been the de facto leader of the Organisation of Petroleum Exporting Countries, or Opec, since the group was founded in 1960. It’s often called the “swing producer” because decisions to increase or trim Saudi output drive the price of oil. Saudi crude accounts for about 1 out of every 9 barrels of global production and can be extracted for about a third of the cost of reserves in the US over the decades.

The Argument
Prince Mohammed’s plan envisions the Aramco IPO as the centrepiece of Saudi Arabia’s biggest economic shakeup since the founding of the country in 1932. Although details of what exactly will be sold remain unclear, Nasser said the IPO will be based on Aramco maintaining the so-called concession, which gives it the right to exploit the kingdom’s oil and gas reserves. For the biggest oil economy, the clock is ticking. Even with the world’s shift to cleaner fuels, oil is expected to continue providing about a third of world energy for the next two decades. Aramco’s IPO will put a price tag on the future of petroleum just as Saudi Arabia is fixing its sights on the end of its own oil age.
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