Saudi Arabia is negotiating with one of the leading energy companies, to sell 1 percent of state oil company Saudi Aramco according to Crown Prince Mohammed Bin Salman, who said in a televised remark that Saudi Aramco could be considering an option to sell more shares preferably to international companies and investors in the next couple of years.
Saudi Aramco is the world’s largest oil company that is listed on Saudi Bourse in 2019. It is a state-run crude oil firm that is the largest exporter in the country. Without elaborating much about the details, Mohammed Bin Salman said, “There are talks with other companies for different stakes, and part of Aramco’s shares could be transferred to the Public Investment Fund (PIF) of Saudi Arabia and a part listed on the Saudi bourse.” In an interview aired by Saudi TV marking the fifth anniversary of Vision 2030, which is the country’s key initiative to diversify its economy away from the oil, he has not revealed the name of the interested company or name of the country, which is currently negotiating with Saudi Aramco.
Saudi Arabia’s 42% of GDP contribution comes from the export of crude oil. Hence, constant fluctuation in the remand of crude oil and increasing dominance of OPEC+ put the economy of the country at great risk. In order to mitigate risk in the future, Saudi Arabia has started to diversify the economy, and to achieve economic diversification, the authorities are attracting foreign investment. The country’s plan to diversify the economy demands mega-project in the country. To raise the fund for many multi-million dollars project, Saudi Arabia has started to sell a portion of its largest oil company. Saudi Vision 2030 has three main pillars and one of them is to become a global investment powerhouse by transforming the country’s location into a hub connecting Afro-Eurasia.
Saudi Aramco has previously sold its stake on the country’s stock exchange Saudi Bourse in December 2019, and raised a total fund worth around $30 billion, which was the world’s largest initial public offering. The latest proposal also underscores the way the country is seeking to effectively monetize Saudi Arabia’s crude oil and mineral assets, in order to generate huge revenue for its multiple ambitious projects in an effort to diversify its oil-reliant economy. In March 2021, the oil company had declared a $12 billion deal to sell a small stake in an existing oil pipeline business to the US-based EIG Global Energy Partners. The debt on Aramco has also surged as the export got hammered in 2020 by the dual whammy of low price for crude oil in the international market and steep cuts in the overall production of the oil caused by the COVID-19 pandemic.
Saudi Aramco is facing pressure to maintain hefty dividend payouts to the Saudi government, which is the biggest shareholder in the company, despite declaring consecutive drops in its profits since it has started to disclose annual earnings in 2019. Saudi Aramco has already posted a 44% slump in net profit, that is pilling immense pressure on government finances as Riyadh is pursuing its megaprojects as a part of economic diversification program.
