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Bloomberg

Saudis in Talks to Sell Aramco Stake to Global Energy Firm

(Bloomberg) — Saudi Arabia’s crown prince said the kingdom 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 late Tuesday. 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 finalizing, but there are discussions happening right now about a 1% acquisition by one of the leading energy companies in the world,” Prince Mohammed, the country’s de facto ruler, 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. That effort has faced hurdles in recent years, with investors spooked by the kingdom’s domestic political crackdown and the killing of Saudi critic Jamal Khashoggi in 2018, and then with the Covid-19 pandemic last year.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.Although the Aramco IPO was the biggest share sale in history the majority of the cash was raised from local investors and rich Saudi families. Most foreign investors balked at the valuation and stayed away. The sale only earned a fraction of the $100 billion originally envisaged.Prince Mohammed said the government, which still controls more than 98% of Aramco’s stock, may sell more shares on the Saudi stock exchange, without giving a timeframe. The state-run company said in a statement that any decision to sell more shares is “a matter for the majority shareholder, who has said it will consider the possibility and timing according to market conditions.”Boost ProductionThe kingdom is increasingly looking at ways to get money from Aramco’s assets. The company announced this month that a U.S.-led consortium will invest $12.4 billion in its oil pipelines. It 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 U.S. and Russia is set to drop over the next 10-20 years, leaving a supply gap for Saudi Arabia to fill,…



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