SAUDI ARABIA is thinking about listing shares in Saudi Aramco, the
state-owned company that is the world’s biggest oil producer and almost
certainly the world’s most valuable company. Muhammad bin Salman, the
kingdom’s deputy crown prince and power behind the throne of his father,
King Salman, has told The Economist that a decision will be
taken in the next few months. “Personally I’m enthusiastic about this
step,” he said. “I believe it is in the interest of the Saudi market,
and it is in the interest of Aramco.”
The potential listing comes as Saudi Arabia grapples with the damage
wreaked on its economy by an oil-price collapse to below $35 a barrel,
as well as mounting tensions with its arch-rival Iran, following the
execution of Saudi cleric Nimr Baqr al-Nimr in early January. It is just
one possible step in an ambitious plan to balance the budget and throw
open the country’s closed economy.
Prince Muhammad made the remarks during his first on-the-record
interview, on January 4th, in which he ranged broadly, from the
geopolitics of the region, to his efforts to foster radical economic
reform in Saudi Arabia.
The prince has held two high-level meetings recently on the
possibility of floating Saudi Aramco shares. Officials say options under
preliminary consideration range from listing some of its petrochemical
and other “downstream” firms, to selling shares in the parent company,
which includes the core business of producing crude.
Officials say Saudi Aramco is worth “trillions of dollars”, but it is
one of the world’s most secretive oil companies and reveals no
information on revenues and offers only limited information on its
hydrocarbon reserves.
Prince Muhammad says that a listing would make the company more
transparent. Diplomats say investors are already being sounded out. The
talk is of first floating part of the company in Riyadh—perhaps 5%. In
time that could rise, though the kingdom would continue to exercise
control over the company.
The upstream part of the business would be most attractive to
investors. At 261 billion barrels, Saudi Aramco’s stated hydrocarbon
reserves are more than ten times those of ExxonMobil, the largest
private oil company. Saudi Aramco is also one of the world’s lowest-cost
oil producers, thanks to the ease of pumping oil in Saudi Arabia.
Speaking about Iran, Prince Muhammad defended Saudi Arabia’s decision
to suspend diplomatic relations on January 3rd after its embassy was
set ablaze in Tehran by crowds protesting against Mr Nimr’s execution.
The prince denied that there was a risk of outright conflict. “A war
between Saudi Arabia and Iran is the beginning of a major catastrophe in
the region,” he said. “...For sure, we will not allow any such thing.”
However, on January 7th, Iran said that Saudi warplanes had attacked its
embassy in Sana’a, Yemen’s capital.
Since Prince Muhammad became head of the defence ministry, and the
Council for Economic and Development Affairs, just over a year ago, the
country’s geopolitical swagger has been coupled with plans for sweeping
economic change at home. These plans include gradually eliminating
subsidies on electricity, water and housing; seeking private-sector
provision in health care and education; introducing a 5% value-added tax
on non-essential goods; and studying the complete or partial
privatisation of over two dozen agencies, including the national airline
and telecoms firm.
Asked if Saudi Arabia was undergoing a “Thatcherite revolution”, Prince Muhammad replied: “Most certainly.”
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