Saudi Arabia reaffirms commitment to Saudi Aramco IPO

orme fadhiliSaudi Arabia has reaffirmed its commitment to the Saudi Aramco IPO (initial public offering), following reports that it has cancelled its plans to sell five per cent of the company

 Reuters earlier quoted a source suggesting the decision to call off the IPO was taken some time ago, and rumours had been circulating since late 2017 that the flotation might be cancelled and shares sold privately to institutional investors instead.

However Saudi Arabia's energy minister Khalid Al Falih, also the chairman of Aramco, said in a statement that the government would proceed with the flotation – set to be the largest ever.

"The government remains committed to the IPO [initial public offering] of Saudi Aramco at a time of its own choosing when conditions are optimum," Al Falih said.

"This timing will depend on multiple factors, including favourable market conditions, and a downstream acquisition which the Company will pursue in the next few months, as directed by its Board of Directors.”

He added that the government had taken a number of measures to prepare for the listing, which international exchanges, notably New York, Hong Kong and London, have been vying to host. The plan is to list shares both on domestic and international exchanges.

Hasnain Malik, Dubai-based Global head of Equity Research and Strategy at Exotix Capital, comments, “Delay to the IPO demonstrates not that there is a lack of commitment to reform, but rather the ability to change course if circumstances change, and the higher oil price certainly qualifies as that, as the country’s reform programme transitions from an aspirational speech to detailed implementation. Saudi Aramco is already a well run company so privatisation was not a step toward efficiency gains. Also Saudi Arabia has already got the nod for inclusion in MSCI’s benchmark Emerging Market equity index, and with it the influx of new international investors.”

Saudi Aramco, will, according to its annual report released in August, maintain its position as the world’s leading crude oil producer by tempering production from mature fields, accelerating younger fields and secondary reservoirs, and developing fresh reserves from new increments, while diversifying operations to capture value from strategic integration and expand natural gas activities.

The company produced an average of 10.2mn bpd of crude oil, including condensate in 2018.Total raw gas processing averaged 12.4bn standard cubic feet per day (scfd). 

It discovered two new oil fields (Sakab southeast of Haradh and Zumul in the Rub’ al-Khali) and a gas reservoir (Jauf, in the Sahba field), and continued its programme to increase the capacity of the Khurais field by 300,000 bpd.

Major project achievements included readying the Midyan non-associated gas field to produce 75mn scfd of natural gas and 4,500 bpd of condensate, displacing liquid fuels for use in power generation, and progress on the Fadhili Gas Plant designed to process up to 2.5bn scfd of raw gas, a component in raising the company’s overall gas processing capacity.

Additional programmes to expand capacity included the Hawiyah Gas Plant’s new processing facilities, which are expected to come on-stream in 2021.

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