DUBAI (Reuters) - The planned sale of a stake in Saudi Arabia’s national oil company Saudi Aramco will occur through an initial public offer of shares in 2018, and the stake sold “will be not be very far off 5 percent”, Deputy Crown Prince Mohammed bin Salman said on Tuesday.
Prince Mohammed was speaking in a nationally televised interview, a year after he launched a series of radical economic reforms including the partial privatisation of Aramco.
The listing of Aramco, expected to be the world’s biggest IPO and raise tens of billions of dollars, is a centrepiece of the government’s ambitious plan - known as Vision 2030 - to diversify the economy beyond oil.
“We have two main factors to decide the percentage to be listed ... First the demand, whether there will be demand or not. Second, what do we have in terms of investments in the pipeline inside Saudi or outside,” Prince Mohammed said, referring to opportunities to invest proceeds of the IPO.
Aramco will be listed on the Saudi bourse in addition to one or more foreign stock exchanges, Saudi officials have said.
Prince Mohammed said that even after the listing, the Saudi government would retain sole control over Aramco’s oil and gas reserves and would decide on production levels. Aramco will have a concession to monetise those reserves.
“The Saudi government will decide on the production ceiling. It is in the interest of the Saudi government to increase the production not reducing it,” Prince Mohammed said.
“The government will not take a decision that goes against its interest or the interest of the company regarding the production.”
Riyadh has traditionally kept an “spare cushion” of excess production capacity, allowing it to raise or reduce levels to influence prices according to the government’s market strategy. Private oil companies, by contrast, do not hold back output for strategic gain.
The proceeds from the Aramco sale will help to develop other industries inside Saudi Arabia and will be invested by the kingdom’s Public Investment Fund, its top sovereign wealth fund, which will spend more than 500 billion riyals ($133.3 billion) over three years after Aramco’s IPO, Prince Mohammed said.
Prince Mohammed, who oversees the kingdom’s economic and energy policies, is leading the Vision 2030 reform drive.
Last year, he said he expected the IPO would value Aramco at least $2 trillion. Any valuation would account for both oil price expectations and the size of Saudi Arabia’s proven oil reserves.
Saudi Arabia, the world’s top oil exporter, has led OPEC and other oil producers to cut crude supply by 1.8 million barrels per day from January for six months to drain a global glut and support prices. The pact is expected to be extended for another six months when OPEC meets on May 25.
“Production is not a political decision, it is an economic decision ... governed by supply and demand, and through the coordination with OPEC and producers from outside OPEC so there is no collapse in oil prices,” Prince Mohammed said.
Reporting by Rania El Gamal; Editing by Andrew Torchia and Jane Merriman