News that Saudi Arabia is considering listing shares in Saudi Aramco, the state-owned oil business that is said to be the most valuable company in the world, has invigorated Middle East-focused investors.
Even listing as little as 5% of the company would create a huge investment opportunity, given that the overall business is thought to be worth many trillions of dollars. Aramco’s chairman has reportedly confirmed that “upstream” assets, the part of the firm that explores for and produces oil, will likely be included in the potential initial public offering (IPO), countering claims that only downstream assets, such as its refining and chemical operations, would be available for investment.
Excitement about an Aramco IPO was sparked by an interview in The Economist with Muhammad bin Salman, Saudi Arabia’s deputy crown prince, who said a share sale is, “something that is being reviewed, and we believe a decision will be made over the next few months”.
The country’s resolution may be prompted by the parlous state of Saudi Arabia’s finances. With the price of Brent crude down at $35 a barrel, the Saudi state, which gets nearly all its revenues from selling oil, is struggling to meet its spending obligations. Data suggests the country has already withdrawn money from its sovereign wealth fund, the Saudi Arabian Monetary Agency.
However, there is no consensus on how much Aramco is worth, and some doubt that the firm’s self-reported oil reserves are accurate. A report by consultancy McKinsey in 2005 estimated Saudi Aramco’s value at $781 billion. However, Mohammed Al Sabban, a former adviser to the Saudi oil ministry, has suggested the company is worth $10 trillion.
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