Saudi Aramco confirms studying options to list in capital markets

From its headquarters in Dharan on Friday, the giant Saudi Arabian oil company released a statement confirming that it was considering listing the company on stock exchanges and selling some shares – though experts expect that only a small portion of the company, perhaps 5 percent, might be auctioned off.

Aramco’s crude oil reserves of 261 billion barrels are more than 10 times that of Exxon Mobil Corp., the world’s largest publicly listed oil company.

“Once the study of these various options is complete, the findings will be presented to the Company’s Board of Directors which will make its recommendations to the Saudi Aramco Supreme Council”, it said. Despite the rout, the country has declined to cut its oil production.

“Personally I’m enthusiastic about this step”, the Prince said. That would easily rank Aramco among the world’s most valuable companies, well above Apple, at $600 billion.

Saudi’s deputy crown prince told The Economist that listing shares boosts transparency.

Saudi Arabia announced, in the last few weeks, measures to increase its revenues and reduce its budget deficit, which stands at 15% of last year’s Gross Domestic Product (GDP). It’s impossible to overstate the power Aramco wields in Saudi Arabia and the global oil market.

Saudi Aramco’s (the national oil company) Al-Khurais central oil processing facility under construction in the Saudi Arabian desert, 160 kms east of the capital Riyadh, on June 23, 2008.

Despite the poor fundamentals, long-term oil bulls may not be able to ignore the prospect of a stake in a behemoth responsible for a daily output of 10 million barrels – or one out of every eight barrels produced in the world. It now operates the Ghawar Field, the world’s largest onshore oil field, and the Safaniya Field, the world’s largest offshore oil field.

Saudi Arabia also seems determined to keep oil prices low in order to undercut the oil-dependent economy of Iran, its chief regional and geopolitical adversary. In the subsequent 35 years, the Saudi government has been able to use its control of Aramco to move the corporate headquarters from NY to Saudi Arabia and to fill more and more jobs with Saudi natives.

“They’re going to be looking at what would be the strings that would be attached to a listing in terms of reporting and any other changes in the way that Saudi Aramco operates”, Mallinson said by phone from London. Aramco might simply be too big to be listed, at least on the Saudi market.

The Economist analogized the situation to concerns about state-owned oil companies in Mexico and Brazil that have been accused of corruption and mismanagement, in response to which the Mexican government has begun to open things up to foreign investors – an idea that conservative politicians in Brazil have also proposed.