Saudi Arabia to Sell More Aramco Stakes

Saudi Arabia is talking with unnamed foreign investors about selling stakes in Aramco, with options that include a 1% acquisition by a leading global energy company, according to the kingdom’s crown prince.

Crown Prince Mohammed bin Salman, the kingdom’s de facto ruler and chairman of Saudi Arabian Oil Co., as Aramco is officially known, said in a television interview that an announcement would come in the next year or two. Other shares could be sold in secondary listings on the Riyadh bourse or transferred to the country’s sovereign-wealth fund, the Public Investment Fund.

The move would represent another attempt to monetize Saudi Arabia’s prodigious oil assets—once considered so strategic that even a minority stake sale seemed far-fetched. Under Prince Mohammed, the kingdom has been willing to lure foreign investors and cede some access to its oil assets in exchange for cash.

Prince Mohammed said an announcement would come in the next year or two.

Photo: courtesy of saudi royal court/Reuters

The initial public offering of Aramco, the world’s most valuable oil company, was a key plank in the crown prince’s plan to transform the Saudi economy and bring foreign investors into the kingdom.

Over several years, he promoted an international listing of up to 5%, but the 2019 IPO failed to generate significant foreign demand. Most major international funds avoided the offering, as they considered the shares too pricey at a market valuation of $1.7 trillion and were concerned about governance issues.  Saudi Arabia ultimately settled on a local listing for a small slice of the company.

Hasnain Malik, a Dubai-based emerging-markets equities strategist at Tellimer, said a new deal would more likely be grounded in geopolitical alignment than pure economics, with the possibility that China might be motivated to deepen its relationships in a region where it has historically exerted little influence, despite relying on hydrocarbon exports.

“Any party interested in a 1% stake in Aramco likely comes from Asia, where the company’s biggest customers are located,” he said. “It is not clear what are the benefits of such a tiny equity stake in a national champion of another country.”

Despite efforts to diversify the economy away from oil, Aramco remains Saudi Arabia’s main source of revenue, with most of its $75 billion dividend filling state coffers.

The forces that propelled Aramco’s growth from a single well to the biggest oil producer in the world are changing underfoot. (Originally published Jan. 31, 2020)

In March, Prince Mohammed announced an initiative to incentivize local companies to cut dividends and instead pump cash into the Saudi economy. Aramco is expected to contribute the bulk of those private sector investments that Prince Mohammed said would top $1 trillion by 2030.

To help finance those contributions, Aramco is reviewing its upstream business, according to executives familiar with the company’s plans. Such a move could open up some of its oil and gas assets to external investors.

The company is in preliminary discussions with advisers to evaluate options, which could include selling stakes in operations at certain fields or entering joint ventures with other large energy producers, the executives said. But Aramco isn’t inclined to include important oil assets and may just form partnerships to develop new gas resources, these executives say.

Aramco is also considering the sale of a stake in its natural gas pipeline network, after striking a $12.4 billion deal in April to sell a 49% stake in a newly formed oil pipeline business to an international consortium led by U.S. investment firm EIG Global Energy Partners.

Write to Stephen Kalin at stephen.kalin@wsj.com and Summer Said at summer.said@wsj.com

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