Riyadh in Talks to Sell More Aramco Shares

Saudi Arabia is in discussions to sell 1% of the shares in Saudi Aramco to a global energy company to raise funds for the kingdom's economic diversification plans, according to Crown Prince Mohammed bin Salman. Prince Mohammed made the comments in a lengthy televised interview with Saudi state and private channels on Tuesday, which marked the fifth anniversary of the launch of his Vision 2030 economic reform initiative. The plan to turn to Aramco again to raise cash highlights the central role that the world's biggest oil company plays as a source of funding for the kingdom's plans to modernize its economy and ultimately reduce its dependence on oil. Last month, Prince Mohammed asked Aramco and other listed companies to support the kingdom's reform plans by funding additional investment projects with money that they would otherwise use to pay dividends (IOD Mar.31'21). The reform efforts are taking place against the backdrop of a global transition away from fossil fuels that will push oil producers such as Saudi Arabia to monetize their assets while there is still demand for them (IOD Apr.26'21). Talks With Chinese Company Prince Mohammed said the kingdom was in discussions to sell additional Aramco shares but did not provide details of a likely timeline (IOD Apr.13'21). "I don't want to give any promises, but there's a discussion for acquisition of a 1% stake by a leading global energy company in an important deal that would boost Aramco's sales in a major country," he said. "There are talks with other companies for different stakes, and part of Aramco's shares could be transferred to the [Saudi] Public Investment Fund [PIF] and [another] part listed on the Saudi bourse," he added. Sources close to Aramco told Energy Intelligence that talks with a leading Chinese energy company about the sale of a 1% stake predate Aramco's initial public offering (IPO) of shares in December 2019 and have continued. The sources added that the company in question would lead a consortium of foreign investors. However, they also signaled that a deal was not imminent and would take time to materialize. In an emailed statement Aramco told Energy Intelligence that a potential decision on whether to list or sell more Aramco shares is a matter for the majority shareholder, who has said it will consider the possibility and timing according to market conditions. World's Biggest IPO Aramco said a "potential decision on whether to list or sell more Aramco shares is a matter for the majority shareholder," a reference to the Saudi government which still owns more than 98% of the shares in the company. The company's 2019 IPO was the world's largest, raising $29.4 billion, and its shares have traded on Saudi Arabia's Tadawul stock exchange since then. The proceeds of the IPO were transferred to the PIF, the kingdom's sovereign wealth fund, for investment in other sectors to help diversify the economy and reduce its reliance on oil (EC Apr.9'21). Prince Mohammed also said in the interview that more of Aramco's shares could be sold to investors in one to two years, a timeline previously reported by Energy Intelligence. Energy Intelligence also reported this week that Aramco is weighing the option of raising funds by offering foreign investors stakes in its unconventional and nonassociated gas fields (IOD Apr.26'21). Last year, the company's management decided to pursue an asset monetization strategy to keep up with demands from the state and to secure funds to support its investment plans. Energy Transition Pressures Prince Mohammed said the kingdom remained committed to making the most of its hydrocarbon resources, but also warned that they did not provide a guarantee of permanent prosperity. He said experts predict that oil demand will start to gradually decrease from around 2030 but that future demand would likely exceed supply and that the kingdom should benefit from this because of its vast resources and low production costs. "So, this is quite a promising part, but we should not rely on it," he added. Crown Prince Mohammed said it was not sustainable for Saudi Arabia to rely on oil revenues in the long term, making implementation of his Vision 2030 plan a necessity. "We are an oil country, not a rich country. ... We were very rich in the 70s and 80s when we had a smaller population and a lot of oil, but now we have 20 million [people] and we are growing quickly. If we do not maintain our savings ... we will be transformed into a poorer country," Prince Mohammed said. Relations With Iran and US