As oil prices plummet, the Kingdom of Saudi Arabia is considering IPOing Aramco, the world's largest oil producer, according to The Economist.
Deputy Crown Prince Mohammed bin Salman told reporters a decision would be made in the coming months.
“I believe it is in the interest of the Saudi market, and it is in the interest of Aramco,” Salman is reported to have said.
Oil fell to below $35 per barrel Thursday, the lowest point for the commodity since 2004, coming off the back of over-supply and tension between the Saudi’s and nearby Iran.
Aramco produces three times more oil than Exxon (
NYSE:XOM,
Forum). A 20% sell-off could bring in $200 billion, according to analysts.
“Aramco is still going to be run like a government agency,” Oppenheimer analyst Fadel Gheit told the Canadian Press Thursday. “The ultimate goal is going to be basically fund the country's budget,” something that the above sell-off would do – but only for one year.
OUR TAKE:
Won’t happen. To sell off 1/5 of your country’s economy to finance a single year of government would be insane, which isn’t to say the Saudi leaders have never done insane things before – like vowing to increase production when prices are low because of over-supply.
This is a weather balloon, intended to shake up Saudi vested interests and prepare them for internal price rises.
And even if it did happen, unless the IPO came at a bargain price, who’s seriously going to heavily invest in oil with prices where they are and the outlook so grim?
Also, for the 80
th time, with prices so low on a per barrel basis, why are we paying the equivalent of $195US per barrel at the pump?
--CP