Year in review: How Aramco defied the odds

Year in review: How Aramco defied the odds
The official ceremony, above, launching Saudi Aramco’s initial public offering in the Saudi capital Riyadh in December. (AFP)
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Updated 31 December 2019

Year in review: How Aramco defied the odds

Year in review: How Aramco defied the odds
  • Aramco overcame sceptical West, geopolitical risks and climate concerns to pull off the world’s biggest share sale
  • IPO has given KSA international capital market status and the confidence to play a global role in the financial world

DUBAI: On Dec. 11, Yasir Al-Rumayyan and Amin Nasser — chairman and chief executive respectively of Saudi Aramco — rang the opening bell at the Tadawul stock exchange in Riyadh in a shower of ticker-tape, and the Kingdom’s business and economic scene was changed forever.

Al-Rumayyan, who had pushed through the initial public offering (IPO) of shares in the face of some opposition from Western financial advisers, spoke of a “proud and historic moment” as he described the event as a “milestone” on the Vision 2030 path to the Saudi economy’s diversification away from oil dependency.

Others thought the IPO’s true significance was even more profound. Ali Shihabi, well-known commentator on Saudi affairs, said the offering was a “monumental development” as part of the “cultural shock therapy” under way in the Kingdom, under the guidance of a new generation of reformist policymakers led by Crown Prince Mohammed bin Salman.

The IPO has instantly given Saudi Aramco the status of the world’s most valuable company, made the Kingdom’s ambitious sovereign wealth fund, the Public Investment Fund, richer by roughly $30 billion, and catapulted Tadawul into the top flight of global stock exchanges.

But, perhaps more significant, it is also the first stage in a process that could see further sales of Aramco shares, with a listing on a foreign stock exchange a distinct possibility in the near future.

On top of the hugely oversubscribed $12 billion bond Aramco issued earlier in the year, the IPO has given Saudi Arabia a certain cachet in the international capital markets and the self-confidence to play a global role in the financial world.

It is also likely to accelerate the Kingdom’s eastward tilt, away from the big financial centers of New York and London and towards the growing Asian hubs, such as Tokyo and Hong Kong.

One executive for an Asian finance house in the Middle East, who did not wish to be named, said: “Some people say floating a small percentage will make no difference, but that misses the point. Aramco has signed up to Tadawul’s standards of transparency and accountability, and no other national oil company has to obey stock market rules like that.”

The opening ceremony was the culmination of a process that began in late 2016, when the crown prince stunned the world with the news that he was considering a stock market flotation for the biggest oil exporter in the world.




A Saudi Aramco oil processing facility in the Eastern Province. The company’s IPO is likely to accelerate the Kingdom’s eastward tilt, away from the big financial centers of New York and London and towards the growing Asian hubs, such as Tokyo and Hong Kong. (Getty Images)

Back then, it was suggested around 5 percent of Aramco might be sold, that the company could be valued at $2 trillion, and that the IPO would happen pretty quickly.

Those plans evolved and adapted to changing circumstance. Last year, at the World Economic Forum annual meeting in Davos, Nasser told Arab News that the biggest single reason for the delay in the IPO was the desire to strengthen Aramco’s position in the booming downstream petrochemicals sector with the acquisition of SABIC.

That deal went through early last year, removing the last strategic obstacle to the IPO.

The valuation had been a matter of debate ever since the IPO plans were first announced.

Seasoned observers of the financial markets agree that there is nothing unusual about a difference of opinion between the vendor (the government of Saudi Arabia in this case) and potential buyers (the international investment community).

Both are looking to maximize their return on the deal.

With a company as big and strategically significant as Aramco, other factors inevitably came into play during the complex negotiations between the government and its advisers.

The oil price — inevitably a big element in determining Aramco profitability and therefore valuation — was under pressure throughout the IPO planning stage as American shale flooded global markets.

As a leading member of OPEC, the Kingdom took action, in partnership with Russia and other non-OPEC oil producers, to stabilize the price.

FASTFACT

6x - Consulting firm Thunder Said Energy found Saudi Aramco to be six times more efficient than ExxonMobil and Chevron in both current emissions and targets for future reduction as a proportion of its gas production.

Then, just as details were being finalized for the publication of the IPO prospectus — the crucial document on which the valuation is assessed — the risks of doing business in the Middle East were thrown into stark relief with the Iranian attacks on Aramco facilities at Abqaiq and Khurais.

With “geopolitical risk” on top of analysts’ minds, another negative had been thrown into the valuation process, despite Aramco’s rapid recovery from the attacks, which had the potential to dramatically alter the IPO arithmetic in turbulent global energy markets.

The whole pricing process was also conducted against the backdrop of a changing investors attitude to “Big Oil” companies as the debate intensified about the best way to tackle climate change.

Despite being the biggest exporter of fossil fuel in the world, Aramco has strong credentials in the environment lobby, with low levels of pollutants from its production and refining processes and a high level of investment in new, anti-polluting technology.

Another factor cited as a headwind when the shares were being priced was Western reaction to the murder of journalist Jamal Khashoggi the previous year, though this had not prevented investors in New York and London from subscribing to the Aramco bond a few months earlier.

By mid-November, when the final decision on pricing had to be taken, there was a huge range in the valuations as assessed by the small army of international and regional financial institutions advising on the IPO.

At a fractious meeting in Riyadh, one banker was reported as saying “there is real tension in the banking syndicate.”

Al-Rumayyan cut through the dissent with a simple formula: The IPO would not be marketed in Western financial centers like London and New York, and would instead focus on Saudi and regional investors.

The Westerners had been the leading advocates of a lower valuation, and Aramco advisers explained that there was little sense in marketing to them when they had been dragging their feet on the valuation.

In any case, ample provision had been made for foreign investors to take up shares in the IPO via the Tadawul.

That logic turned out to be amply justified. At a compromise valuation of around $1.7 trillion, there was more than enough demand in the region when the share sale was finally launched.

The offer was nearly five times oversubscribed in total, implying that more than $100 billion of demand was chasing only $26 billion worth of shares.

Among Saudi investors, there was big demand for the flagship offering. Some 5 million citizens and expat residents bought shares in the offering to become equity partners in the company that has been at the heart of the Kingdom’s prosperity for more than 80 years.

They can look forward to a healthy dividend stream as well as bonus shares if they hold on to their stake for a minimum of six months.

So far, they have had no reason to regret their decision to invest in the world’s most profitable company.

In contrast to many big IPOs in 2019 — like ride-hailing firms Uber and Lyft, not to mention the aborted flotation of WeWork — Aramco shares surged on opening, and soon hit the $2 trillion valuation, allowing the Kingdom to tick another box of the IPO check-list.




Drone attacks in September sparked fires at two Saudi Aramco oil facilities in Abqaiq but they recovered quickly from the attacks. (AFP)

It has since fallen back, but is still above the issue price. Investment bank adviser Goldman Sachs has shares in reserve to smooth out price fluctuations.

With the dividend already set in stone, there are two main, interconnected factors that will determine the share price going forward — Aramco’s underlying level of profitability, and the price of oil on international energy markets.

“If oil prices stay consistently in the $70-$80 range, there will be greater interest in global oil stocks generally,” said the executive of the Middle East-based Asian finance house.

But the OPEC+ limits on production could also affect Aramco profits for the current year, he warned.

“Overseas skepticism about the valuation has not disappeared,” the financier added, implying that the mainly Western banks that tried to talk down the IPO price would not buy shares at current prices.

But in that case, Aramco has another trick up its sleeve. There are plans under discussion to list the shares on an Asian stock market, with Tokyo edging ahead of Hong Kong as the preferred venue. Asian investors are likely to appreciate Aramco’s robust dividend, and are equally keen to ensure strong trading ties with their main supplier of crude oil.

The logic is for Aramco to look further eastwards, away from the skeptical West. “Asia has been Aramco’s primary growth market since the 1990s, when Ali Al-Naimi (former Aramco president and Saudi energy minister) identified it as the largest center for future oil demand,” Ellen Wald, American energy consultant and author of the book Saudi Inc, told Arab News.

“When people notice a so-called ‘move to Asia,’ they are just noticing a decades-old plan.”


King Salman prays for ‘continued security and stability’

King Salman prays for ‘continued security and stability’
Updated 14 May 2021

King Salman prays for ‘continued security and stability’

King Salman prays for ‘continued security and stability’
  • All mosques and prayer areas maintain full health protocols

JEDDAH: King Salman performed Eid prayers in NEOM on Thursday. 

Earlier, he extended greetings to Saudi citizens and residents and Muslims all over the world.

In a tweet on Thursday, the king said: “We thank God Almighty for making the blessed Eid Al-Fitr a sign of good and satisfaction after completing the fasting and prayers of Ramadan. 

“Eid carries hope, optimism, and happiness, and we pray to God to cleanse the entire world of all evil, protect us from harm, and grant us continued security, stability, and tranquility.”

The king said this Eid is an occasion to overcome the ordeal that the world has suffered from the health, social and economic effects of the coronavirus pandemic.

King Salman said he was “optimistic about the positive steps in place to achieve stability in the Arab world, so that security and prosperity prevail for all parts of the globe.”

“Combating this pandemic that has befallen the world requires all of us to adhere to the health measures announced by the Ministry of Health, including social distancing, and the need to receive the vaccine, which will work to immunize our dear community of citizens and residents,” the king said.

Mask-clad worshippers entered Makkah’s Grand Mosque along socially distanced paths to offer Eid prayer. Worshippers at the Prophet’s Mosque in Madinah also followed COVID-19 protocols.

As Saudi families gathered to celebrate the first day of Eid Al-Fitr, the Kingdom’s health minister urged people to follow official health precautions to combat the spread of the coronavirus disease (COVID-19).

“I need your attention on your Eid. Be careful, refrain from shaking hands completely, be sure to practice social distancing, and avoid large gatherings,” Tawfiq Al-Rabiah tweeted on the eve of festivities.

“Go to the Eid prayer with your own prayer mat, wear the mask constantly, sanitize your hands before and after receiving or giving Eidiya, and leave a safe distance between you and others,” he added. The minister also warned parents not to allow children to hug or kiss their grandparents, saying that such practices may endanger older members of the family.

Worshippers across the Kingdom performed Eid Al-Fitr prayers in 20,569 mosques and open-air prayer areas set up by the Ministry of Islamic Affairs, Dawah and Guidance.

Mosques and prayer areas were equipped with facilities in accordance with the health protocols approved by the authorities to prevent the spread of COVID-19. 

The imams spoke during the Eid sermon about the blessing of completing fasting and praying qiyaam, and the importance of the continuation of good deeds after Ramadan.

Meanwhile, Saudi Arabia reported 11 more COVID-19-related deaths on Thursday. The death toll now stands at 7,122.

The Health Ministry reported 1,116 new cases, meaning that 430,505 people have now contracted the disease. There are 9,244 remaining active cases, 1,344 of which are in critical condition.

According to the ministry, 377 of the newly recorded cases were in Riyadh, 320 in Makkah, 134 in the Eastern Province and 71 in Madinah. In addition, 1,129 patients recovered from the disease, bringing the total number of recoveries to 414,139.

Saudi Arabia so far has conducted 17,812,376 PCR tests, with 71,457 carried out in the past 24 hours.

Saudis and expats in the Kingdom continue to receive their COVID-19 jabs, with 11,195,164 people inoculated so far.


OIC: Continuing Houthi attacks against civilian targets tantamount to war crimes

OIC: Continuing Houthi attacks against civilian targets tantamount to war crimes
Updated 14 May 2021

OIC: Continuing Houthi attacks against civilian targets tantamount to war crimes

OIC: Continuing Houthi attacks against civilian targets tantamount to war crimes
  • The OIC announced on Thursday that it will hold an emergency meeting on Sunday, at the request of Saudi Arabia, to discuss the situation in Jerusalem and Gaza

JEDDAH: The Organization of Islamic Cooperation (OIC) strongly condemned the “cowardly, hostile action” by terrorist Houthi militias in Yemen, which on Thursday launched eight drones and three ballistic missiles at civilian targets in the Kingdom.

The Arab coalition fighting the Houthis in support of Yemen’s internationally recognized government said it intercepted and destroyed the drones and missiles before they reached their targets.

OIC Secretary-General Yousef Al-Othaimeen praised the coalition forces for their vigilance and professionalism in responding to the Houthi’s attack, which took place on the Muslim holiday of Eid Al-Fitr, which marks the end of the fasting month of Ramadan.

“The continued launch of ballistic missiles and drones toward civilians and civilian objects is considered war crimes, and a flagrant defiance of international laws, customs and agreements,” he said.

He also reiterated the OIC’s solidarity with the Kingdom in all the steps Saudi authorities take to deter Houthi aggression and protect civilians.

Hamdan Al-Shehri, a political analyst and international-relations scholar, told Arab News: “This is a particularly special day for Muslims, Eid Al-Fitr, and all Muslims are also preoccupied by what is happening in Palestine.

“We always hear Iran making threats, but instead of standing with Palestine it is targeting Makkah, Madinah and the Kingdom. This demonstrates the Houthi’s futility, and the extent of Tehran’s malice and how it is always standing with the Houthi forces.

“As we’ve seen, such events are always against civilians. Iran and the Iran-backed Houthi militias have their weapons aimed at civilians because they want civilian victims.” Al-Shehri added: “These are war crimes. The global community should do something, especially about the hundreds of ballistic missiles and drones. The world is only watching.” Meanwhile, the OIC announced on Thursday that it will hold an emergency meeting on Sunday, at the request of Saudi Arabia, to discuss the situation in Jerusalem and Gaza. The meeting of the foreign ministers of OIC member nations will address the continuing Israeli attacks in the Palestinian territories, which have escalated since Monday.

Israeli troops were massing at the Gaza border on Thursday. Meanwhile Hamas targeted Israel with rocket attacks. The increasingly intense hostilities have caused international concern and provoked clashes between Jews and Arabs in Israel.

With fears growing that the violence could spiral out of control into full-blown war, the US announced on Wednesday it is sending an envoy, Hady Amr, to the region.


Saudis divided between electronic, traditional Eidiya

Saudis divided between electronic, traditional Eidiya
Updated 14 May 2021

Saudis divided between electronic, traditional Eidiya

Saudis divided between electronic, traditional Eidiya
  • Due to the ongoing pandemic, many Saudis turn to electronic payments to give out Eidiyas this year as opposed to cash in hand

JEDDAH: As Muslims around the world are celebrating Eid Al-Fitr in their own unique ways, children in every nation tend to always steal the spotlight with their tireless demands for Eidiya money.

Similar to Halloween in the west, children wait eagerly for this time of the year so they can dress up, visit one household to the next, and receive as much Eidiya money (and chocolates) as possible.

However, due to the ongoing coronavirus (COVID-19) pandemic, many Saudis turned to electronic payments to give out Eidiyas this year. Still, others prefer the old-fashioned way of handing out Eidiyas in cash while also taking COVID-19 health precautions into consideration.

Saudi dentist Jameela Al-Ghamdi, 29, said being deprived of family gatherings for Eid Al-Fitr last year was frustrating. 

“It was so strange to go through,” she told Arab News. “We never skipped visiting our families on such special occasions.”

She is now relieved because people in her family susceptible to the virus have received the vaccine jab and these special occasions can happen again. 

“I am so happy to dress up with my sisters and also visit family members I have not seen in an unfairly long time,” Al-Ghamdi said.

Her family, although mostly vaccinated, prefers to give out Eidiyas electronically, as Al-Ghamdi says she is a fan of technology. 

“We tried giving out Eidiyas through STC Pay last year and it was very quick, simple and convenient. No need to break down SR100 at minimarkets anymore,” she said.

Ali Mansour, a 33-year-old Saudi industrial engineer at Saudia airline, said the best part of Eid is visiting family. He also added the occasion is not the same without gatherings. Mansour’s family started giving out Eidiyas electronically long before the pandemic because of its convenience.

HIGHLIGHTS

•Similar to Halloween in the west, children wait eagerly for this time of the year so they can dress up, visit one household to the next, and receive as much Eidiya money (and chocolates) as possible. •However, due to the ongoing coronavirus (COVID-19) pandemic, many Saudis turned to electronic payments to give out Eidiyas this year. Still, others prefer the old-fashioned way of handing out Eidiyas in cash while also taking COVID-19 health precautions into consideration.

“Way before the pandemic and the creations of such platforms like STC Pay, we gave out Eidiyas through bank transfers,” he told Arab News. “Electronic payments are not something new to us. My dad would always transfer the Eidiya into my account, never in cash.” He added that the last time he received Eidiya in cash was probably back in high school.

Young children are the most significant part of the Eid celebration, said Mansour, as they will receive Eidiyas in cash since they cannot use devices.

Saudi Lujain Al-Jehani, 27, said Eid Al-Fitr is extra special this year because people were deprived of the holiday gatherings last year.

“Due to the pandemic, we did not have the opportunity to celebrate together,” she told Arab News. “We are so excited and thrilled. We are going to prepare cakes and activities that we were deprived of last year.”

Al-Jehani’s family prefers to give out Eidiyas in person: “The experience is different, holding cash in your hand,” she said.

Al-Jehani added that most of the elderly in her family do not know how to use electronic payment platforms.

Saudi medical student Renad Bajodah, 25, said Eid celebrations are important experiences and will have a lasting impact on a child’s memory.

“Eid means joy to me. It means coming together and honoring the days of our lives, and celebrating after the completion of the holy month of Ramadan,” Bajodah told Arab News. 

“The excitement of Eid’s eve is what is most beautiful to me, seeing kids wearing their new pajamas all happy on the night of Eid. It also teaches parents how to give to their children. To give them the best experience and beautiful childhood memories.” 

While Bajodah’s family still prefers Eidiyas in cash, they sanitize them thoroughly before delivering in carefully closed envelopes. They like the “traditional old school style,” he said.

Saudi Yara Ahmad, 27, who works in the market research industry, said Eid Al-Fitr means a lot to her. The whole experience from new clothes, delicious food and candy, family gatherings and Eidiya money is something adults and children alike look forward to every year.

Electronic Eidiya did not bode well for her family which continues to distribute cash to children while keeping in mind the sanitization part and necessary precautions.

Saudi Salman Al-Otaibi, 32, who prefers the old-fashioned way of giving out Eidiyas while following hygienic measures, said a new voting poll for Eidiyas that has been circulating a week before Eid Al-Fitr takes away a special element.

“The idea has nothing to do with the purpose of Eidiyas and bringing a smile on children and adults’ faces,” he told Arab News. 

“Because it has become a contest and everyone is running after people in groups and social media sites to vote. I think it is far from what Eidiya is supposed to mean.”


Taif rose oil a ‘treasure to be discovered’, says French envoy

Taif rose oil a ‘treasure to  be discovered’, says French envoy
Updated 14 May 2021

Taif rose oil a ‘treasure to be discovered’, says French envoy

Taif rose oil a ‘treasure to  be discovered’, says French envoy
  • Taif roses have, throughout history, expressed the cultural identity of Taif city, says Mayor Ahmed Al-Qathami

TAIF: “Treasure to be discovered,” were the words used by the French ambassador to the Kingdom describing the rose oil industry in Taif, after his recent visit to the 14th Taif Rose Festival held at Al-Radf Park and organized by the Taif Chamber of Commerce and Industry.

Ludovic Pouille toured the old town of Taif at night with representatives from the province and the Ministry of Culture, expressing his happiness to discover the vital market on the eve of the celebrations of Eid Al-Fitr, and to drink traditional coffee in the historic neighborhood of the capital of roses.

He also discovered the traditional professions in the old city of Taif, discussing with the mayor the tourist capacity of the city and opportunities to cooperate with France.

Mesmerized by the fragrance and the pink scenery around him, the envoy walked the roses’ stairway in the festival covered in roses from both sides, describing it as a “stairway to heaven.”

French Ambassador Ludovic Pouille

Dr. Ahmed Al-Qathami, mayor of Taif Province, said that the visit of the French envoy reflects the importance and reputation of Taif roses across borders, “one of the most important tools in promoting the Kingdom’s tourism, culture and economy.”

Al-Qathami told Arab News that Taif roses have, throughout history, expressed the cultural identity of Taif city, symbolizing its beauty thanks to their odor and perfume.

“Taif roses are a source of cultural inspiration to all Saudis for whom the roses are a way of life and a cultural destination that attracted dignitaries and important figures throughout history,” he added.

He added that the visit of the French ambassador indicates the depth of friendship and love he has for Saudi Arabia. “This visit reflects his knowledge and appreciation for the efforts made to sustain the Taif rose industry, and develop its products and promote them at local and global levels.”

Al-Qathami pointed out that Taif roses were, and still are, an “honorable image” for Taif province, and all the celebrations and festivals held in the past and the accompanying exhibitions contributed in shaping its identity as a cultural hub that helped in strengthening the
ties of communication between the city and those who love and admire it.

Adel Al-Nimri, a rose factory owner in Al-Hada, Taif, said that the prominent and important figures who visit Taif and admire the great efforts “give us the impetus to continue and improve the product to reach the highest standards of
production, and export them abroad after gaining widespread fame.”

He stressed the importance of caring for the Taif rose industry and teaching people about it for future generations, adding that Taif roses are known for their purity and fragrance.


Saudi interior minister greets security personnel for Umrah success

Saudi interior minister greets security personnel for Umrah success
Updated 13 May 2021

Saudi interior minister greets security personnel for Umrah success

Saudi interior minister greets security personnel for Umrah success

RIYADH: Saudi Interior Minister Prince Abdul Aziz bin Saud bin Naif on Thursday conveyed the congratulations of King Salman and Crown Prince Mohammed bin Salman to the personnel of the Ministry of Interior and security sectors on the success of security plans for the Umrah season and the advent of Eid Al-Fitr.

Prince Abdul Aziz, who is also the chairman of the Umrah Supreme Committee, expressed thanks to the leadership for the support that enabled the security sectors to perform their duties in this year’s exceptional Umrah season, expressing his pride in the efforts made by security men in the service of Umrah performers and visitors.

Muslims performed Eid Al-Fitr prayer throughout Saudi Arabia on Thursday.

In Makkah, the prayer was performed at the Grand Mosque and led by the Imam of the Grand Mosque Sheikh Saleh bin Abdullah bin Humaid. The prayer was attended by Makkah Gov. Prince Khalid Al-Faisal and a number of princes.

In Madinah, the prayer was performed at the Prophet’s Mosque. The prayer was attended by Madinah Gov. Prince Faisal bin Salman.

The prayer was also performed in various regions and attended by regional governors and senior officials.

The imams who led the prayer congratulated Muslims on Eid Al-Fitr, praying to Allah to accept their fasting, prayers, charity and good deeds.