Saudi Arabia is considering taking its state-owned oil behemoth public. According to deputy crown prince Mohammed bin Salman, the IPO for Saudi Aramco could take place in the coming months. By selling shares, Saudi Arabia and Aramco would be able to better raise funds, promote transparency and fight against corruption.
The oil production of Saudi Aramco is roughly twice the amount of its closest competitor, representing more than 10% of the world’s output of oil. A slump in crude oil prices has brought oil to a 12 year low. This has had a serious impact on the revenue of Saudi Arabia, as the country has been forced to take steps to reduce public spending. Salman has stated that he hopes to reduce the country’s dependence on oil.
The massive size of the company would result in any public offering being a major event. Some market analysts have said that about 5% of the company could be offered initially, while more shares could be sold at a later date. Either way, it appears that Saudi Arabia will maintain the overwhelming majority control of the oil company. But giving up any portion of the company would cause Saudi Arabia to lose some control over the lucrative global oil market.
Even with falling oil prices, Salman has stated that the Saudi economy is in decent shape. The country has reportedly increased its non-oil revenues by 29%.
On Wednesday, the price of crude oil sold by members of OPEC fell below $30 a barrel. This represents the lowest price in nearly 12 years. Because of the slump, OPEC members lost around $500 billion in revenue last year.
Aramco produced 10.25 million barrels per day in December. The company is responsible for the entirety of crude oil production in Saudi Arabia. By comparison, OAO Rosneft of Russia produces about 5 million barrels per day, while Exxon Mobil produces 4 million barrels per day.