The world’s biggest oil firm Saudi Arabian Oil Co., known as Aramco, has confirmed it is pushing ahead with what is expected to be the world’s biggest initial public offering (IPO).
The state-owned oil giant is planning to put a portion of its business onto the Saudi domestic stock exchange, the Tadawul. The long-awaited move is a key part of Crown Prince Mohammed bin Salman’s strategy to reduce the nation’s dependence on oil and diversify its economy.
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Here’s what you need to know about it.
1. It’s expected to be the biggest fund-raising the world has seen
Around 1-3% of the company is expected to be made available for investors. Valuations of the company vary by hundreds of billions of dollars, but even a 2% share sale would put it significantly ahead of any other IPO. The 2014 $25 billion flotation of Chinese e-commerce company Alibaba is the current record-holder.
Saudi Aramco’s offering has been several years in the making, with Riyadh first signalling its intentions back in 2016. But earlier plans to list had been put on hold amid questions over whether the company was worth the $2 trillion valuation Saudi Arabia was seeking. Western bankers value it in the region of $1.2-1.5 trillion. The company also suffered a number of attacks on its infrastructure earlier in the year, which knocked out a significant amount of its production capacity.
2. It’s phenomenally profitable
The company posted a net income of $46.9 billion for the first half of 2019. This is double what the world’s most valuable public company, Apple, made in the same period. Exxon Mobil, the largest listed oil company, made just over 10% of Aramco's profit. In 2018, Aramco its annual net income of $111.1 billion was more than that of oil giants BP PLC, Chevron Corp, Exxon Mobil Corp, Royal Dutch Shell PLC and Total SA combined.
3. It’s responsible for more carbon emissions than any other fossil fuel company
According to research by the Climate Accountability Institute, Aramco has contributed almost 60 billion tonnes of carbon dioxide equivalent - more than 4% of global output - to the atmosphere since 1965.
4. Saudi Arabia is trying to decrease its reliance on oil
It’s the world’s biggest oil exporter, but the country wants to wean itself off crude as part of the Crown Prince’s plans to diversify the nation’s economy - dubbed Vision 2030. He wants to significantly shift up its production of energy from green sources, building solar and wind capacity. Saudi Arabia also plans to start exporting gas by 2030.
The government recently announced it will start offering loans for renewable energy projects and manufacturers of renewable energy components.
5. Little is known about the company - opening up to investors is a big deal
At a time when investors are becoming increasingly focused on the climate and sustainability, the listing of a giant fossil fuel firm is seen as quite controversial.
To sweeten investor sentiment, Aramco has in recent years taken some steps towards transparency. It’s started publishing financial results and has opened itself up to more journalists. The company has also hired Western women for some of its top jobs - notable in a region and industry where women tend to be less well represented.
This echoes a wider move by the Kingdom to invite in the outside world. The country will for the first time offer tourist visas, as it strives to grow the industry to 10% of gross domestic product by 2030.