Saudi in talks to sell 1% stake in Aramco to global energy firm

Bloomberg

Saudi Arabia is in talks to sell a 1% stake in state oil giant Saudi Aramco to a “leading global energy company” as he forecast an economic rebound after the coronavirus pandemic.
The kingdom is looking at the potential sale — which could be worth about $19 billion, based on the company’s market value — as a way to lock in customer demand for the country’s crude, Crown Prince Mohammed Bin Salman said in a rare interview on a Saudi television channel. While providing few details on which company is involved in the talks, he said the sale could take place in the next two years.
“I don’t want to give any promises about deals finalising, but there are discussions happening right now about a 1% acquisition by one of the leading energy companies in the world,” Prince Mohammed said. “I cannot mention the name but it’s a huge company. This deal could be very important in strengthening Aramco’s sales in the country where this company resides.”
China is the largest buyer of Saudi Arabian oil. Almost 30% of the kingdom’s crude exports went to the Asian country last month, according to data compiled by Bloomberg. Japan, South Korea and India were the next biggest importers.
As well as China, Aramco is keen to make further inroads into India, the fastest growing market for oil consumption before the pandemic hit. But the company faces strong competition from other suppliers and Indian refiners are among the most price-sensitive in the world.
The crown prince is increasingly leaning on Aramco, the world’s biggest oil company, to help finance his plan to transform and diversify the Saudi economy — an initiative dubbed Vision 2030.
Aramco’s 2019 initial public offering — in which it sold about 2% of its stock on the Riyadh bourse — raised almost $30 billion. The money was transferred to the kingdom’s sovereign wealth fund and was meant to support investments to shift the biggest Arab economy away from a reliance on oil sales. Since then, Aramco has also taken on debt and started selling off some non-core assets to maintain a $75 billion dividend, most of which goes to the state.
Prince Mohammed said the company may sell more shares on the Saudi stock exchange, without giving a timeframe.
The kingdom is increasingly looking ways to get money from Aramco’s assets. The company announced this month that a US-led consortium will invest $12.4 billion in its oil pipelines. Is also considering a deal for gas pipelines, Bloomberg reported this week.
Aramco has separately started a strategic review of its upstream oil and gas assets that could see the firm opening them up to foreign investors.
Saudi Arabia will likely need to increase crude production further to make up for demand that’s expected to keep rising over the next two decades, according to the crown prince. While consumers such as those in China and India use more, output from producers like the US and Russia is set to drop over the next 10-20 years, leaving a supply gap for Saudi Arabia to fill, Prince Mohammed said.
Even if more pessimistic forecasts predicting that demand will start falling by around 2030 come true, supply will drop even more rapidly, giving Saudi Arabia the opportunity to sell more crude, he said. Prince Mohammed didn’t say by how much the country planned to raise output.
The government said last year it had instructed Aramco to increase its maximum production capacity to 13 million barrels a day, up from 12 million barrels currently. That plan is “progressing very well,” Chief Executive Officer Amin Naser said in March, without giving further details on timing. Saudi Arabia regularly pumps about 10 million barrels a day and has slowed production this year amid cuts by the Opec+ group.
Speaking on the fifth anniversary of the launch of Vision 2030, Prince Mohammed said the nation’s jobless rate will fall as the economy goes through a “V-shaped” recovery.
“Unemployment will fall to less than 11% this year, then it will reach around 10%, then 7% in 2030,” he said in the interview on the Rotana Khalejia television station.
Unemployment among Saudi nationals falls to 12.6% at the end of last year, after peaking at 14.9% in September.