Saudi Aramco: a blow for Mohammed bin Salman
Saudi Aramco could postpone international listing plans and favour a private share sale to sovereign wealth funds and institutional investors. Anjli Raval tells Daniel Garrahan about obstacles to the listing and why it's so important for the crown prince.
Filmed by Rod Fitzgerald. Produced by Daniel Garrahan
Saudi Aramco could postpone plans for an international listing. Yet, he has learned that the Gulf states $1 trillion oil company may now favour a private share sale to the world's biggest sovereign wealth funds and institutional investors. Well, our oil and gas correspondent, Anjli Raval joins me now. Anjli, you broke the story on Friday, what's the latest?
So Saudi Aramco is now considering shelving plans possibly for an international listing and looking towards a private sale to sovereign wealth funds and other sovereign places, such as the Chinese, for example. Alongside a listing on the domestic exchange. So that's sort of the latest, the country has been ploughing ahead and really trying to get this thing underway. It's been in the works for more than a year. So in some ways, it sort of deals a blow to Muhammad bin Salman, who's a powerful crown-prince who's been behind this drive.
There's been growing concerns in the kingdom about the feasibility of the international listing. What would you say are the main obstacles to one happening there?
Right from the get go, when MBS, as he's known, announced he wanted to do this. There have been concerns about how much information Saudi Aramco-- which is such a secretive company, how much information it would have to disclose to any potential outside investor from the company's finances but also information on reserves. And more importantly, the relationship the company has with the state, it's effectively an arm of the state. And aside from the concerns within the ranks of the company itself, you've also seen bigger concerns about potential exchanges themselves. So London and New York have been battling it out to try and nab this listing, but there are concerns, for example, with New York. Legal advisers to Aramco have said this is the riskiest of all options because there's new legislation in the US which enables families of the victims of 9/11 to sue Saudi Arabia. At the same time with the London listing, you've got the investment community here up in arms about any watering down of listing rules to allow a flotation. So there's lots going on.
So the potential risks of any international flotation whether it's the UK or US, what about the advantages of this kind of private placement slash domestic listing? What is there to be gained for Saudi Aramco by going down that route?
Fundamentally, I think it's about control. They're able to control the message more-- much, much more. They don't have to disclose all the information, maybe they would have needed to if it was going to be a stock exchange listing. So you were able to have much more one-on-one relationships with particular investors. And at the same time when it comes to the domestic listing, you are fundamentally able to have a hand in how the company is portrayed. The Saudi exchange doesn't have the same governance rules and the same listing rules as a big exchange in New York or London, for example.
As the follow-up the question-- clearly, this a huge deal in Saudi Arabia, why is it so important to the kingdom?
For Mohammed bin Salman, this is the centrepiece of these overarching economic reforms. The country needs to diversify away from oil. But what MBS is trying to do is through a whole series of privatisations of which this is the biggest one. He wants to basically use the proceeds of an Aramco IPO, and the proceeds would be invested into non-oil industries. So there are some questions about whether or not that strategy is even successful, but it's a big symbolic push to privatise the economy. And so that's why it's so important. So if it doesn't happen, it's a big blow for the crown prince.
Anjli Raval, thank you so much.