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Saudi Aramco could be privatised as oil prices continue to dip

Mohammed bin Salman, Deputy Crown Prince of Saudi Arabia, announced that he supported the initial public offering (IPO) of Saudi Aramco. 

If gone public, Saudi Aramco will be the world’s most valuable listed company, overshadowing ExxonMobil.

Prince Mohammed bin Salman said ““Personally I’m enthusiastic about this step, I believe it is in the interest of the Saudi market, and it is in the interest of Aramco.”

This news has come as a shock to the oil sector and it is speculated if a share float would change the Saudi Arabia’s strategy of driving down oil prices by refusing to cut back on production.  

Mr. Fadel Gheit, a veteran oil analyst at Oppenheimer & Co brokerage said “If western investors are to be interested in Aramco they are going to want all sorts of details and reassurances about the way the company will be run, its growth prospects and dividend policies. Will the Saudi government be willing to provide these and relinquish control?

“The company may have huge oil reserves but look at what happened when Petrobras (the Brazilian state oil group) was privatized. There was a total lack of understanding of free markets and the stock dived in value,” he added. 

Saudi Arabia has 16 per cent of the world’s proved oil reserves, more than ten times higher than those held by ExxonMobil, the world’s largest listed company. 

Furthermore, Saudi Aramco is the world’s largest oil producer with output of 10 million barrels per day and based on Exxon’s current market value of $317 billion, Saudi Aramco could be worth as much as $3 trillion.