Saudi mulling IPO for Aramco

Saudi Arabian Oil Co., known as Saudi Aramco, confirmed media reports that the company was exploring a possible public float in a statement Friday.

Wave of privatization in Saudi Arabia, including the recent announcements about Saudi Aramco IPO plans show that the country is going to adjust to the low oil prices through tighter fiscal policy, according to Jason Tuvey, Middle East Economist at British economic research and consulting company Capital Economics.

Saudi Aramco said in a statement on Friday the listing proposal was consistent with the "broad and progressive direction pursued by the kingdom for reforms, including privatisation in various sectors of the Saudi economy and deregulation of markets".

They refuse to cut crude production as they seek to drive less-competitive players, including US shale producers, out of the market.

"Personally I'm enthusiastic about this step", the Prince said.

The starting point for understanding is that Prince Salman told the Economist he wants to list a minority stake in Aramco - perhaps 5 percent - while leaving control firmly in government hands.

The potential listing comes as Saudi Arabia grapples with the damage wreaked on its economy by an oil-price collapse to below $35 a barrel, as well as mounting tensions with its arch-rival Iran, following the execution of Saudi cleric Nimr Baqr al-Nimr in early January. "I believe it is in the interest of the Saudi market, and it is in the interest of Aramco", he said.

Saudi Arabia is considering selling shares in its state-owned giant oil company, Saudi Aramco.

Saudi Aramco claims 261 billion barrels of proved reserves, almost 20 times the proved reserves of Exxon Mobil Corp. Still, Aramco is unlikely to list on the biggest exchanges, according to Bloomberg oil strategist Julian Lee. It now operates the Ghawar Field, the world's largest onshore oil field, and the Safaniya Field, the world's largest offshore oil field. He noted that Saudi Arabia doesn't let foreign oil companies own oil reserves in the country, treating them like contractors and not as partners or part-owners.

A sale could in the short term cover much of the huge state budget deficit which Riyadh is running because of low oil prices; the deficit totaled almost $100 billion previous year.

Recommended: How much do you know about Saudi Arabia? Investment banks like Goldman Sachs and Morgan Stanley, which lead the charts globally during the same period, have not been as active in Saudi Arabia, where the markets have been largely closed to global investors. In the 1970s the company became fully state-owned. Last year, the government restructured Aramco and removed it from the clutches of the oil ministry.

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