The initial public offering of Saudi Arabia’s energy major Aramco is still a part of the Kingdom’s plans, Oil Minister Khalid al-Falih said, following reports yesterday citing industry sources as saying that the IPO had been canceled.
Arab News quoted Al-Falih as saying, “The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum. This timing will depend on multiple factors, including favorable market conditions, and a downstream acquisition which the Company will pursue in the next few months, as directed by its Board of Directors.”
Industry sources had told Reuters a day earlier that Aramco had disbanded its group of financial advisors and had turned its attention to another deal: the acquisition of “a strategic stake” in industrial conglomerate Sabic.
Earlier reports said plans were for Aramco to buy 70 percent in Sabic, paying for it between US$50 and US$70 billion to the Saudi sovereign wealth fund. In other words, US$50-70 billion would come out of one Saudi state pocket—Aramco—and go into the other one that is the sovereign wealth fund, PIF.
When these reports first emerged, there were suggestions that the Aramco listing might be suspended due to the lack of what Al-Falih called optimum conditions.
The listing that was initially supposed to be both at home and abroad has been delayed several times with Aramco slow to achieve the transparency levels required for a listing on any of the world’s largest bourses, and necessary to spark investor interest.
This investor interest, too, has been more reluctant than Riyadh may have expected, as people become more careful with the oil industry after the 2014 price collapse.
Oil prices have also been a problem.
Despite an improvement brought about by the production cut agreement from 2016, prices never stayed as high as Saudi Arabia needed them to in order to make the Aramco IPO a success, as large consumers such as India and the United States complained about prices at the pump, pressuring OPEC to do something about it.
Al-Falih’s assurances that Aramco has completed its preparation for the listing may be true in part or wholly, but the fact remains that conditions are not optimum, and it’s anyone’s guess when—if ever—they will become optimum for the IPO to take place.