Saudis in talks to sell Aramco stake to global energy company

(Bloomberg) –

The Crown Prince of Saudi Arabia said the kingdom was in talks to sell a 1% stake in state-owned oil giant Saudi Aramco to a “leading global energy company” as he forecast an economic rebound after the coronavirus pandemic.

The kingdom is considering the potential sale – which could be worth around $ 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 said. Salman in a rare interview on a Saudi Arabian TV station on Tuesday night. While providing few details on the company involved in the negotiations, he said the sale could take place within the next two years.

“I don’t want to make any promises on finalizing the deals, but there are currently talks about a 1% acquisition by one of the world‘s leading energy companies,” said Prince Mohammed, the country’s de facto leader. . “I can’t mention the name but it’s a huge business. This agreement could be very important to strengthen sales of Aramco in the country where this company resides. “

China is the biggest buyer of Saudi oil. Nearly 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 second largest importers.

Besides China, Aramco is keen to make further inroads in India, the fastest growing oil consumption market before the pandemic strikes. But the company faces stiff competition from other suppliers, and Indian refiners are among the most price sensitive in the world.

The crown prince is increasingly relying on Aramco, the world’s largest oil company, to help finance his plan to transform and diversify the Saudi economy – an initiative dubbed Vision 2030. The effort is successful. has encountered obstacles in recent years, investors frightened by the kingdom. domestic political repression and the murder of Saudi critic Jamal Khashoggi in 2018, and then with the Covid-19 pandemic last year.

Aramco’s initial public offering in 2019 – in which it sold around 2% of its shares on the Riyadh Stock Exchange – raised nearly $ 30 billion. The money was transferred to the kingdom’s sovereign wealth fund and was intended to support investments aimed at diverting the largest Arab economy from dependence on oil sales. Since then, Aramco has also taken on debt and has started selling some non-core assets to maintain a $ 75 billion dividend, most of which goes to the state.

Although Aramco’s IPO was the biggest sale of shares in history, the majority of the money was raised from local investors and wealthy Saudi families. Most foreign investors balked at the valuation and stayed on the sidelines. The sale only brought in a fraction of the $ 100 billion originally forecast.

Prince Mohammed said the company could sell more shares on the Saudi Stock Exchange, without giving a deadline.

Aramco Assets

The kingdom is increasingly looking for ways to get money out of Aramco’s assets. The company announced this month that a US-led consortium would invest $ 12.4 billion in its pipelines. Also considering a deal for gas pipelines, Bloomberg reported this week.

Aramco has separately initiated a strategic review of its upstream oil and gas assets that may allow the company to open them up to foreign investors.

Last year, the kingdom’s economy shrank the most in more than three decades, according to estimates by the International Monetary Fund. But the outlook has improved since then. The budget deficit is expected to be 4% of gross domestic product in 2021, less than the 12% gap last year.

Speaking on the fifth anniversary of the launch of Vision 2030, Prince Mohammed said the country’s unemployment rate will decline as the economy experiences a “V” recovery.

“Unemployment will fall to less than 11% this year, then it will reach around 10%, then 7% in 2030,” he said in an interview with the Rotana Khalejia television channel.

Unemployment among Saudi nationals fell to 12.6% at the end of last year, after peaking at 14.9% in September.

Prince Mohammed also spoke of the delicate ties with the United States, where President Joe Biden’s administration has said it wants to recalibrate a relationship that was at the heart of former President Donald Trump’s Middle East strategy.

‘Neighboring country’

“There will never be a 100% agreement between two countries,” Prince Mohammed said. “Between the different administrations of the White House, the margin of divergence could increase or decrease but we agree with the Biden administration” about 90% of the time, he added.

Asked about the kingdom’s regional rival, Iran, the crown prince softened his tone from previous statements, saying Saudi Arabia was working to resolve its differences with the Islamic Republic.

“Ultimately Iran is a neighboring country,” he said, adding that the kingdom wanted Iran to prosper but disagreed with its nuclear program and support for regional militias.

“Today we are working with our partners in the region to find solutions to these problems and we hope to overcome them and have a good and positive relationship with them,” he said.

In the 90-minute interview, Prince Mohammed also said:

Part of the government’s stake in Aramco could be transferred to the sovereign wealth fund, known as PIF. The decision to increase value added tax to 15% last year “will be temporary for one to five years at most, with a 5% VAT target. at 10% »The kingdom does not intend to introduce an income tax

(Updates with details on Aramco asset sales.)

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