Markets, not government, will decide value of Saudi Aramco IPO: Energy minister

Saudi Energy and Oil Minister Khalid Al-Falih. (AFP)
Updated 04 April 2018
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Markets, not government, will decide value of Saudi Aramco IPO: Energy minister

  • Official estimates of the valuation of the IPO have so far been set at $2 trillion for the whole company
  • Kingdom is more interested in optimizing the value of its 260 billion barrels of oil reserves — oil minister
DAVOS: Khalid Al-Falih, Saudi energy minister and chairman of Aramco, said that the value of the forthcoming initial public offering (IPO) in the national oil company will be determined by the markets, and not by the company itself or the government.
Al-Falih told a session of the annual meeting of the World Economic Forum (WEF) in Davos that the Aramco IPO should be seen in the context of the much wider economic agenda in the Kingdom, including the rest of the multibillion-dollar privatization program.
“Aramco is on the top of that list, but the valuation is not a single target. (Crown Prince) Mohammed bin Salman and all the others involved in the privatization process realize it (the value of the IPO) is going to be a market-determined value. We cannot set the price of the shares, the market will do that.”
Official estimates of the valuation of the IPO have so far been set at $2 trillion for the whole company, which would give a value of $100 billion for the sale of a 5 percent stake, as has been suggested in official statements about the IPO, slated for 2018.
“Aramco is a great company and that has been proven for decades. It will be listed when the time is right. We (Aramco) and the government have done a lot to prepare for that. But the valuation is for the market to do, not the company or the government,” Al-Falih said.
He added that Saudi Arabia had 260 billion barrels of oil reserves, according to a “conservative” estimate. “The Kingdom is more interested in optimizing the value of those 260 billion barrels. So the global framework we are working in is to reduce boom and bust, which is destructive and bad for jobs and for consumers.”
Al Falih’s comments came on a CNN panel session entitled “The New Energy Equation” with leaders of the global oil and gas industry. Also on the panel were Russian Energy Minister Alexander Novak, US Energy Secretary Rick Perry, his Indian counterpart Dharmendra Pradhan, and Daniel Yergin, prize-winning author and industry analyst.
The panel was asked if it thought the output-cuts alliance between Russia and OPEC, which has helped reduce global production and led to a recent recovery in the oil price, would last through 2018.
Novak said: “The deal between OPEC and non-OPEC, under the leadership of Al-Falih, showed that it is not only possible to overcome economic but also political difficulties. It has proven to be efficient and can be used in the future.”
Al-Falih said that the OPEC target remained to balance production and demand for oil: “We have got to be careful we don’t go out of balance for a while and for the glut to resurface. We have got to manage this fragile market and stay the course. Everyone if focused on that for 2018.
“I think it’s highly unlikely we’ll exit the deal in 2018. We should aim for a gradual smooth exit in 2019,” he added.
On the “shale revolution” — which has enabled the US to become a major producer of oil and driven down the price — Perry said: “I don’t think shale will be a spoiler for the world oil industry. The reforms going on on Saudi Arabia, Mexico and India can drive consumption and innovation.”
Novak said: “We should not be afraid of shale oil production in general. It is still a small part of overall global production.
The panel was generally skeptical that the era of “peak oil” — when global production would start to deteriorate — was imminent. Pradhan said: “India will be depending on conventional energy sources for the next 20 years. We are a developing country and I am confident that our requirement will continue to grow.”
Yergin agreed saying, “I think we’re seeing about as strong demand for oil as we’ve ever seen, and I don’t think it will peak until 2035-40.”


Can a hungry Mali turn rice technology into ‘white gold’?

Updated 20 October 2018
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Can a hungry Mali turn rice technology into ‘white gold’?

  • Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change
  • Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983

BAGUINEDA: When rice farmers started producing yields nine times larger than normal in the Malian desert near the famed town of Timbuktu a decade ago, a passerby could have mistaken the crop for another desert mirage.
Rather, it was the result of an engineering feat that has left experts in this impoverished nation in awe — but one that has yet to spread widely through Mali’s farming community.
“We must redouble efforts to get political leaders on board,” said Djiguiba Kouyaté, a coordinator in Mali for German development agency GIZ.
With hunger a constant menace, Malians are cautiously turning to a controversial farming technique to adapt to the effects of climate change.

 

Dubbed the System of Rice Intensification (SRI), the new method was pioneered in Madagascar in 1983. It involves planting fewer seeds of traditional rice varieties and taking care of them following a strict regime.
Seedlings are transplanted at a very young age and spaced widely. Soil is enriched with organic matter, and must be kept moist, though the system uses less water than traditional rice farming.
Up to 20 million farmers now use SRI in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast, said Norman Uphoff, of the SRI International Network and Resources Center at Cornell University in the US.
But, despite its success, the technique has been embraced with varying degrees of enthusiasm. Uphoff said that is because it competes with the improved hybrid and inbred rice varieties that agricultural corporations sell.
For Faliry Boly, who heads a rice-growing association, the prospect of rice becoming a “white gold” for Mali should spur on authorities and farmers to adopt rice intensification.
The method could increase yields while also offering a more environmentally-friendly alternative, including by replacing chemical fertilizers with organic ones, he said.
He also pointed out that rice intensification naturally lends itself to Mali’s largely arid climate.

FACTOID

Up to 20 million farmers now use rice intensification in 61 countries, including in nearby Sierra Leone, Senegal and Ivory Coast.