Saudi Arabia’s government is considering selling shares in state oil giant Saudi Aramco as part of a privatisation drive to raise money due to falling oil prices, deputy crown prince Mohammed bin Salman has revealed
“This is something that is being reviewed, and we believe a decision will be made over the next few months,” bin Salman said in an interview to The Economist and reported by Reuters.
Saudi Aramco is the world’s largest oil firm with crude reserves of about 265bn barrels with over 15 per cent of all global oil deposits. If it went public, it could become the first listed company valued at US$1 trillion or more, analysts have estimated.
“Personally I’m enthusiastic about this step. I believe it is in the interest of the Saudi Arabian market, and it is in the interest of Saudi Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around the company.”
He, however, did not say how large a stake the government might sell in Saudi Aramco, which produces over 10mn barrels of oil per day, three times as much as the world's largest listed oil company, ExxonMobil.
A sale could, in the short term, cover much of the huge state budget deficit which Riyadh is running because of low oil prices; the deficit totalled nearly US$100bn last year.
But while it could increase foreign investors’ interest in the Saudi Arabia’s stock exchange, the sheer volume of equity could initially weigh heavily on the market, which has a capitalisation of US$384bn, reports have suggested.
Bin Salman, who as chairman of the new Council of Economic and Development Affairs has broad authority over the economy, said the government would sell assets in a range of state firms, healthcare, education and some military industries.
“It will decrease some of the pressure that the government has, and some of them may create good profit.”
He said that the government planned to provide state-owned funds with assets worth US$400bn in the next few years.
The funds will generate profits from unused assets, turning them into companies that will eventually go public, bin Salman added.
