But the Kingdom of Saudi Arabia is seriously considering creating a much larger company – by staging an initial public offering (IPO) for shares in its state-owned oil company, Saudi Aramco.
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Aramco controls 261 billion barrels in oil reserves, more than 10 times what Exxon Mobil – the largest publicly traded oil company – has.
Saudi Aramco said in a statement on Friday the listing proposal was consistent with the “broad and progressive direction pursued by the kingdom for reforms, including privatisation in various sectors of the Saudi economy and deregulation of markets”. This Friday, the Brent oil barrel closed the day at United States dollars 33.04, a decline of 0.23%.
“Personally I’m enthusiastic about this step”. A share sale could make it the world’s most valuable company.
Saudi Aramco has since confirmed that it’s considering an IPO, and bankers have been left reeling.
Abhishek Deshpande, an analyst at Natixis, said talk of an IPO shows the kingdom’s determination to address the economic consequences of low oil prices.
The announcement comes after oil prices plummeted to 12-year lows on world markets because of a global supply glut, increasing strains on Saudi Arabia’s public finances.
The 30-year-old prince, who has become a key player in Saudi’s leadership since his father, King Salman, ascended the kingdom’s throne last January, said taking the company public would be in the interests of the market, the company and greater transparency.
The deputy crown prince also said KSA will aim to further diversify into non-oil industries, including uranium mining and religious tourism, among others.
In recent months, this trend has manifested itself in ways that have grabbed the world’s attention: Saudi Arabia’s increased assertiveness in its foreign policy, not least in confronting its rival Iran, alongside its crushing of dissent at home.
The plan, which will help the kingdom’s constrained finances as a result of continued low oil prices, would also be the biggest IPO in stock market history.
The funds will generate profits from unused assets, turning them into companies that will eventually go public, Salman said, citing as one example five million square metres of land on the coast in central Jeddah that are now owned by the air defence system. Aramco would be the world’s largest company by market capitalization, and the Saudi stock exchange would suddenly be a big deal.
“Aramco is still going to be run like a government agency”, he said.
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“What they need is more revenue of some sort, so obviously if they sell a bit of Aramco they’ll get some in, and of course you can still improve efficiency of whatever a state-owned company does”, Vicky Pryce, chief economic adviser at CEBR, told Reuters news agency.
