Saudi Arabia negotiates the sale of 1% of Aramco to an international energy company

Saudi Crown Prince Mohamed Bin Salman during Tuesday's interview on Saudi television COURTESY OF SAUDI ROYAL COURT / Reuters

Prince Mohamed Bin Salman, heir and de facto ruler of Saudi Arabia, has revealed that the kingdom is in talks to sell 1% of Aramco, the state oil company, to a large international energy company.

The announcement came on Tuesday night, during an interview with Saudi television on the occasion of the fifth anniversary of the launch of its reform program known as

Vision 2030

.

"I don't want to make any promises about a deal that is not yet closed, but talks are underway right now about a 1% acquisition [of Aramco] by one of the world's leading energy companies," said the prince. Mohamed, during the second part of the interview, dedicated to the projects. “I cannot mention the name, but it is a great company. This agreement could be very important to strengthen Aramco's sales in the country where this company is located ”, he added.

The sale would mean revenues of about 19,000 million dollars (about 15,750 million euros), according to the market value of the Saudi oil company, the largest listed in the world. The heir, who carries out the day-to-day management of the kingdom, also said that Aramco, which went public at the end of 2019, could sell more shares, including to international investors, in the next two years.

Hours after the interview was broadcast, the British economic daily

Financial Times

reported that Saudi Arabia had resumed talks with the Indian company Reliance Industries to acquire a stake in that company's refining and petrochemicals affiliate. The president of Reliance, Mukesh Ambani, already announced the plan in 2019, but the pandemic stopped it. At the time, it was contemplating Aramco buying 20% ​​of the Indian conglomerate for about $ 15 billion. Now the kingdom is weighing paying with stocks and cash, but in what proportion remains to be determined

.

Some analysts have suggested that the prince may have alluded to that operation, but other sources point to negotiations with a group of Chinese investors to buy shares in the Saudi oil company. If the deal with Reliance is finalized, it would be the first time that Aramco has paid a transaction with shares. For Saudi Arabia this is more than just an investment. It certainly seeks to deepen ties with the market in which energy consumption is growing the most.

Since he launched the economic diversification project with the horizon of 2030, the prince, who is colloquially known as MBS by his initials, has relied on the national oil company to finance this ambitious transformation.

His attempt to attract foreign investment ran into the image problem posed by domestic political repression and, in particular, the assassination of critical journalist Jamal Khashoggi in 2018.

Operations to overcome "dependency" on crude oil

Its first public offering of shares (takeover) obtained close to 30,000 million dollars by placing 1.7% of the company on the Riyadh Stock Exchange. Although it was the largest takeover in history, it did not reach the initial goal of obtaining 100 billion dollars for 5% of the shares. International investors expressed doubts about the company's valuation at a time when it is betting on the substitution of fossil fuels.

The money raised was transferred to the sovereign fund (Public Investment Fund, PIF) to support investments aimed at overcoming what MBS described as “dependence on oil”. Since then, Aramco has also gone into debt and sold some non-essential assets to maintain the promised $ 75 billion dividend, most of which goes to the state. Earlier this month, the oil company announced the signing with a US consortium of an investment of 12.4 billion dollars in its pipelines and is studying another agreement for the gas pipelines. In addition, it has initiated a strategic review of its

upstream

assets

,

with the possibility of also opening them to foreign capital.