Saudi Arabia prepares for the IPO of oil giant Aramco by 2021

Saudi Arabia’s crown prince Mohammed bin Salman insisted the stalled plan to sell shares in oil giant Aramco will go ahead, promising an initial public offering by 2021 and sticking to his ambitious view the state-run company is worth USD 2 trillion or more.

According to Bloomberg.com, the 33-year-old bin Salman’s said that he believes late 2020, early 2021, and the investor will decide the price on the day.

”I believe it will be above USD 2 trillion. Because it will be huge, ”Mohammed bin Salman stated.

The IPO project was first announced in 2016 as the cornerstone of the prince’s Vision 2030 plan to modernize the Saudi economy. Officials repeatedly said the deal was on track, on time”for the second half of 2018, but earlier this year they said it would be delayed into 2019. Soon after, Aramco put the IPO on hold and instead started talks to buy a majority stake in local petrochemical giant Sabic, a deal potentially worth USD 70 billion.

According to Mihammed bin Salman, the IPO’s delay had its origin in mid-2017, when it became clear that Aramco needed a push into petrochemicals.

The Aramco IPO would be a seismic event for financial markets. Prince Mohammed said he hoped to raise a record USD 100 billion by selling a 5 percent stake, dwarfing the previous record, set in 2014, when Chinese retailer Alibaba Group Holding Ltd. raised USD 25 billion.

For Wall Street, it would be a money-maker, with banks from JPMorgan Chase & Co. to Citigroup Inc. already working for Aramco. Yet, in a world moving away from oil, the IPO would be a test of the appetite of global for investors fossil fuels.

Prince Mohammed bin Salman said the deal between Aramco and Sabic, which he hopes will close next year, was key for the future of the country’s energy industry. The state-owned company can pull it off easily due to its low debt, he said.

”If we want to have a really strong future for Aramco after 20, 30, 40 years from today, Aramco has to invest a lot in downstream because we know that the new demand for oil 20 years from now, it will be from petrochemicals,” he said.

The prince said that the Saudi government will keep the shares of Aramco after the IPO, rather than transfer them into the sovereign wealth fund as originally planned. Instead, the PIF will receive the USD 70 billion from the sale of its stake in Sabic, plus the USD 100 billion that country hopes to raise from the Aramco IPO.

Prince Mohammed bin Salman provided a detailed timetable of his plans for Aramco, saying that after the Sabic deal is completed in 2019, the company would need a full financial year before it can go ahead and sell shares to the public.

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