Saudi Aramco lines up banks, eyes local listing: Sources

Saudi Aramco is expected to give leading roles to JPMorgan, Morgan Stanley and the National Commercial Bank for its planned initial public offering (IPO), a source familiar with the transaction has told Reuters news agency.

It will also likely add Citi, Goldman Sachs, HSBC and Samba Financial Bank to the list of banks managing the transaction, a first phase of which could take place locally before the end of this year, said the same source and two others familiar with the matter.

Saudi Arabia‘s newly-appointed energy minister, Prince Abdulaziz bin Salman, said on Monday that the kingdom was aiming for the Aramco IPO “as soon as possible.”

He was speaking for the first time since his appointment a day earlier, replacing Khalid al-Falih, at an energy conference in Abu Dhabi in the United Arab Emirates.

Aramco is preparing to sell up to a five percent stake by 2020 to 2021, in what could be the world’s biggest IPO.

It is still is meeting banks pitching for roles on the detail this week and is expected to appoint the advisers in the coming days, two sources told Reuters news agency early on Monday.

Morgan Stanley, JPMorgan and HSBC were chosen to play a leading role in the transaction before the process was halted last year.

Goldman Sachs, HSBC and JPMorgan declined to comment, as did Aramco.

Citi, Samba, Morgan Stanley and National Commercial Bank did not immediately respond to request for comment.

Economic transformation

The IPO is a centrepiece of Saudi Arabia’s economic transformation drive to attract foreign investment and diversify away from oil. 

The kingdom is gearing up to fast-track a local listing of Aramco by bringing in the head of Saudi Arabia’s sovereign wealth fund, Yassir al-Rumayyan, who was recently named the new chairman of the state oil giant and leads an executive committee overseeing plans to float shares in Aramco.

Should Aramco proceed with a local listing this year, international banks on the deal would be tasked with promoting the company to international investors looking to buy its shares on the Saudi main exchange, Tadawul.

It is not yet clear on which international exchange Aramco would list, but sources have told Reuters the board had determined that listing in New York would carry too many legal risks to make it a realistic option.

Aramco raised $12bn this year in its first international bond issue, obtaining more than $100bn in demand.

Many saw that deal as a relationship-building exercise with international investors before its IPO, which has faced repeated delays.

The debt sale was expected to help fund Aramco’s $69.1bn acquisition of a 70 percent stake in petrochemicals firm Saudi Basic Industries Corp (SABIC) from the Saudi sovereign wealth fund, a deal that many saw as a transfer of government funds aimed at boosting the Saudi Crown Prince Mohammed bin Salman‘s economic agenda.

Prince Abdulaziz also revealed that Saudi Arabia wants to have uranium production and enrichment in the future for its planned nuclear power programmes that will begin with two atomic reactors. 

“We are proceedings with it cautiously … we are experimenting with two nuclear reactors,” he said. 

Saudi Arabia has said it wants to tap nuclear technology for peaceful uses, but the enrichment of uranium is a sensitive step in the nuclear fuel cycle because it can open up the possibility of military uses of the material, the issue at the heart of Western and regional concerns over Iran‘s atomic work.

Seeking market balance

Speaking at the conference, Prince Abdulaziz also said his country would continue working with other producers to achieve market balance and that an OPEC-led supply-curbing deal would survive “with the will of everybody”.

He told reporters there would be “no radical” change in the oil policy of Saudi Arabia, OPEC’s de facto leader, which he said was based on strategic considerations such as reserves and energy consumption.

The prince had helped negotiate the deal between the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, to cut global crude supply in order to support prices and balance the market.

He told reporters on the sidelines of the conference that the OPEC+ alliance was “staying for the long term” and called on OPEC members to comply with output targets.

“We have always worked in a cohesive, coherent way within OPEC to make sure that producers work and prosper together,” the prince said.

“It would be wrong from my end to pre-empt the rest of the OPEC members,” he said when asked whether there was a need for further oil production cuts to support the market. 

The Saudi minister declined to comment on oil prices, which rose on Monday following the news of his appointment. 

Global benchmark Brent Crude futures were up 35 cents at $61.89 a barrel by 0846 GMT, while US West Texas Intermediate was up 31 cents at $56.83. 

Prince Abdulaziz said he did not believe world energy demand had slowed and that the global economic outlook was expected to improve once a trade dispute between the United States and China was resolved.

The oil ministers of Oman and Iraq earlier told reporters in Abu Dhabi that it was too early to assess whether deeper cuts were required to support oil markets at a time of global recession concerns due to the US-China row.

The oil minister of Iraq, OPEC’s second-largest producer, said Baghdad was committed to complying with the OPEC-led deal and that his country’s production stood at 4.6m barrels a day. 

“We are definitely committed to respect [the curbs] … our exports have decreased by at least 150,000 bpd from the south,” Thamer Ghadhban said.

On Sunday, the UAE’s energy minister, Suhail bin Mohammed al-Mazroui, said OPEC and non-OPEC producers were “committed” to achieving oil market balance and that Abu Dhabi would support any consensus decision on further production cuts.

The OPEC+ joint ministerial monitoring committee, known as JMMC, will meet on Thursday in Abu Dhabi on the sidelines of the energy conference.