Saudi Aramco IPO a step closer as decree creates new corporate structure

Saudi Aramco’s initial public offering could be the biggest in history, raising up to $100 billion. (Reuters)
Updated 05 January 2018
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Saudi Aramco IPO a step closer as decree creates new corporate structure

DUBAI: Saudi Arabia has taken a crucial step in its plans to privatize some of Saudi Aramco by changing the legal status of the national oil giant into a joint stock company.

By incorporating Aramco, the government will be able to offer equity in it either on domestic or foreign stock exchanges, or to any outside investor. 

The government has said it plans to sell 5 per cent of Aramco as part of the plan to reduce oil dependency and the role of the public sector under the Vision 2030 strategy.

A decree by the Council of Ministers to implement a change in Aramco’s legal status was published on several official sites. A spokesman for the company confirmed the move. “As a customary step in the preparation process for a Saudi initial public offering (IPO), Aramco has been registered and converted from a royal decree company to a joint stock company.

“This establishes the framework to allow future investors to hold shares in the company alongside its shareholder, the government,” the spokesman added.

According to one scenario for the privatization, Aramco would mount the biggest IPO in history, raising as much as $100 billion on international stock markets. Other possibilities being considered include an IPO on the Tadawul market in Riyadh, potentially alongside a private sale of shares to foreign investors.

The government is committed to an IPO in some form this year, and incorporation as a joint stock company shows that this process is on track. There has been speculation that the sale could be delayed or even canceled altogether.

“This is technical but is a necessary step toward the eventual sale. It means that the government will be in a position to push the button on a share sale, now that shares are in existence in a form that investors can hold,” said one Saudi banking source who did not wish to be identified.

Reuters, citing official Saudi sources, reported that Aramco has a fully paid up capital of SR60 billion ($16 billion), divided into 200 billion shares.

It added that the new board of Aramco will have 11 members, of whom six will be appointed by the government, with big shareholders allowed to propose board members at a general meeting of the company.

The government will retain the right to appoint or dismiss the chairman, currently Khalid Al-Falih, who is also energy minister, and to set oil prices, Reuters said.

Saudi Arabia has been the driving force behind a strategy to push oil prices higher by limiting global output of crude, in partnership with Russia. Yesterday Brent oil was trading at $68.02 per barrel, its highest level since late 2015, after the dramatic fall in value in the summer of 2014.

“There is still a lot to do. Apart from choosing the venue or venues for the IPO, Aramco and its advisers also have to decide the nature of the sale. Saudi citizens will be expecting some form of preferential pricing, and the mechanics of that are quite complicated,” said the Saudi banker. Some experts believe the IPO venue will be announced after a meeting of the company and its advisers later this month.

Several international exchanges have been vying for the lucrative right to stage the Aramco IPO. The New York Stock Exchange, the world’s biggest, is believed to be in contest with the London Stock Exchange, which has proposed some rule changes to accommodate the Saudi company.

Other contenders include Hong Kong, which could be an important venue if, as has been suggested, the Kingdom does a private deal with a big Chinese investor. Others intermittently in the frame for the IPO include Tokyo, Singapore and Toronto.

Once the Aramco IPO is set in train, it will signal the start of a further $200 billion worth of privatizations, with virtually all state-owned assets in the Kingdom for sale, from power generators and transport infrastructure through to hospitals, schools and even football clubs.


Libya’s NOC declares force majeure on El Sharara oilfield

Updated 18 December 2018
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Libya’s NOC declares force majeure on El Sharara oilfield

  • El Sharara — a 315,000 barrels a day field was taken over on Dec. 8 by groups of tribesmen, armed protesters and state guards demanding salary payments
  • Some government officials favor offering quick cash to the occupiers to make them leave, but NOC officials have warned that would set a precedent

TRIPOLI: Libya’s state oil firm NOC has declared force majeure on operations at the country’s largest oilfield, El Sharara, a week after it announced a contractual waiver on exports from the field following its seizure by protesters.

The 315,000 barrels a day field, located in the south of the North African OPEC member country, was taken over on Dec. 8 by groups of tribesmen, armed protesters and state guards demanding salary payments and development funds.

Officials have been unable to persuade the groups, who have been camping on the field, to leave the vast, partly unsecured site amid disagreements how best to proceed, workers on the field said.

Some government officials favor offering quick cash to the occupiers to make them leave, but NOC officials have warned that would set a precedent and encourage more blockades, workers at the oilfield say.

NOC has described the occupiers as militia trying to get on the payroll of field guards, a recurring theme in Libya where many see seizing NOC facilities as an easy way to get heard by the weak state authorities.

Production will only restart after “alternative security arrangements are put in place,” NOC said in a statement.

Operations at the smaller El Feel oilfield continued as normal, engineers said.

“Production at Sharara was forcibly shut down by an armed group — Battalion 30 and its civilian support company — that claimed to be providing security at the field, but which threatened violence against NOC employees,” NOC Chairman Mustafa Sanallah said in the statement.

His comments came after the chief of staff of the Tripoli-based government, Abdulrahman Attweel, criticized some of Sanalla’s previous comments about the protesters as “irresponsible.”

“These people (guards) were there to protect the field without salaries and without any attention to them and their daily needs, not in terms of accommodation, supply, transportation and communication,” Attweel told Al-Ahrar channel late on Monday.

Their demands were legitimate, he said, echoing comments by some southern lawmakers and mayors demanding more jobs and development for the neglected region.
The blockade has been complicated by the presence of tribesmen, who have argued against quick cash payments saying they want funds to improve hospitals and other services, which might take time to deliver.

The shutdown of the El Sharara has not affected the El Feel oilfield, also located in the south. It continued to pump around 70,000 barrels a day, field engineers said.
Its exports were being routed via the Melittah oil and gas port, which like El Feel belongs to a joint venture NOC has with Italian energy company Eni, another engineer said.

A spokesman for NOC did not respond to a request for comment.
El Sharara crude is normally transported to the Zawiya port, also home to a refinery. NOC runs the field with Spain’s Repsol , France’s Total, Austria’s OMV and Norway’s Equinor, formerly known as Statoil.