EnergyWatch

Saudi Arabia in talks to sell Aramco stake to global energy firm

According to the Saudi crown prince, the kingdom and a global energy company are negotiating a 1 percent sale of the oil giant.

Photo: AHMED JADALLAH/REUTERS / X90013

Saudi Arabia’s crown prince said the kingdom is in talks to sell a 1percent stake in state oil giant Saudi Aramco to a "leading global energy company" as he forecast a rebounding economy in the aftermath of the coronavirus pandemic.

The kingdom is looking at the potential sale -- which could be worth about USD 19bn, based on the company’s market value -- as a way to lock in customer demand for the country’s crude, Crown Prince Mohammed Bin Salman said in a rare interview on a Saudi television channel late Tuesday. While providing few details on which company is involved in the talks, he said the sale could take place in the next two years.

"I don’t want to give any promises about deals finalizing, but there are discussions happening right now about a 1 percent acquisition by one of the leading energy companies in the world," Prince Mohammed, the country’s de facto ruler, said. "This deal could be very important in strengthening Aramco’s sales in the country where this company resides."

China is the largest buyer of Saudi Arabian oil. Almost 30 percent of the kingdom’s crude exports went to the Asian country last month, according to data compiled by Bloomberg. Japan was the next biggest importer.

The crown prince is increasingly leaning on Aramco, the world’s biggest oil company, to help finance his plan to transform and diversify the Saudi economy -- an initiative dubbed Vision 2030. That effort has faced hurdles in recent years, with investors spooked by the kingdom’s domestic political crackdown and the killing of Saudi critic Jamal Khashoggi in 2018, and then with the Covid-19 pandemic last year.

Aramco’s 2019 initial public offering – in which it sold about 2 percent of its stock on the Riyadh bourse – raised almost USD 30bn. The money was transferred to the kingdom’s sovereign wealth fund and was meant to support investments to shift the biggest Arab economy away from a reliance on oil sales. Since then, Aramco has also taken on debt and started selling off some non-core assets to maintain a USD 75bn dividend, most of which goes to the state.

Battered by the coronavirus pandemic, the kingdom last year saw its economy shrink the most in more than three decades, according to estimates from the International Monetary Fund. But the outlook has since improved. The budget shortfall is projected to be 4 percent of gross domestic product by the end of this year, narrower than last year’s 12 percent gap.

Speaking on the fifth anniversary of the launch of Vision 2030, Prince Mohammed said the nation’s unemployment rate will fall below 11 percent this year as the kingdom’s economy goes through a "V-shaped" recovery.

"Unemployment will fall to less than 11 percent this year, then it will reach around 10 percent, then 7 percent in 2030," he said in the interview on the Rotana Khalejia television station.

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

Prince Mohammed also touched on the delicate ties with the US, where President Joe Biden’s administration has said it wants to re-calibrate a relationship that was a centerpiece of former president Donald Trump’s Middle East strategy.

‘Neighboring Country’

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

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

"In the end, Iran is a neighboring country," he said, adding that the kingdom wanted Iran to prosper but took issue with its nuclear program and support for regional militias.

"We’re working today with our partners in the region to find solutions to these issues and we hope to overcome them and have a good and positive relationship with them," he said.

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

  • Some of the government’s shares in Aramco could be transferred to the sovereign wealth fund, known as the PIF
  • The decision to raise the value-added tax to 15 percent last year "will be temporary from one to five years maximum, with VAT target at 5 to 10 percent"
  • The kingdom has no plans to introduce an income tax

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