China is creating a state-owned consortium to discuss about Saudi’s Crown Jewel Aramco

Saudi Aramco

Most popularly known as Aramco, is a Saudi Arabian national petroleum and gas company. Firstly, it is based in Dhahran. Its value has been estimated between US$1.25 trillion and US$10 trillion. Which makes it the world’s most valuable company.

Secondly, Saudi Aramco has the world’s largest proven crude oil reserves. Estimated at more than 260 billion barrels. It also has the largest daily oil production. It owns, operates and develops all energy resources based in Saudi Arabia.

Vision 2030

Saudi Arabia’s Deputy Crown Prince, Mohammad bin Salman, has accepted a report from the consulting firm of Mc Kinsey & Co. Named entitled Vision 2030. Seems as his blueprint for turning the Saudi economy from oil. Laying the foundations for advanced private sector. Following, he has also decided to sell a 5-10 percent stake in the country’s national oil company.

Through an initial public offering. A number of international investment banks think the IPO and Aramco’s market capitalization will be in the vicinity of two trillion dollars. Therefore, newly listed company with the largest market capitalization on the planet.

Financial and industry experts do IPOs determination and the pricing of shares. On the basis of the company’s economic and financial data. And prevailing market conditions.

In the case of a ‘standard’ oil company, this would be based on extensive geological findings of retrievable reserves. And ultimately on discounted annual earnings of the company after all applicable taxes. Would these requirements and projections be followed in the same format for an Aramco IPO? Probably not. Because the calculations would require extensive intrusion into Saudi Arabia’s perception of a number of highly queasy covenants.

China State-Owned Consortium

China is gathering a consortium that will act as a headstone financier in the initial public offering of Aramco. People present at this meeting will possess high prudence of the discussions. This consortium includes state-owned oil giants and banks and its sovereign wealth funds.

Saudi Aramco is a key exporter to China together with Russia’s Rosneft. With potential $100 billion equity sale that would be the world’s largest to date.

Chinese possible investment, makes it more probably that the national energy giant would search for a listing in Asia. With Hong Kong instantly the favorite among stock markets in the region.

“The IPO will help decide which country can secure the crude supplies from the company and Saudi Arabia going forward.

“The company would consider participating in the IPO depending on market conditions.” (Wang Dongjin’s words.) Sinopec says the oil giant would discuss the IPO with Aramco.

Asia Register

In conclusion, Saudi authorities plan to list up to 5 percent of Aramco. On the Saudi stock exchange in Riyadh, and also one or more international markets.

Also, the $100 billion IPO price tag is based on Aramco being valued at $2 trillion. There are different versions about valuation of this giant.

“The Saudis are serious about Asia. They can maintain market share there. At the end of the day, Aramco needs to sell its oil. This is just another way of guaranteeing a long-term market.” (Reuters)