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Saudis in talks to sell Aramco stake to global energy company

(Bloomberg) – The Crown Prince of Saudi Arabia has said the kingdom is in talks to sell a 1% stake in state-owned oil giant Saudi Aramco to a “leading global energy company” as he plans an economic rebound after the coronavirus pandemic. during the potential sale – which could be worth around $ 19 billion, based on the company’s market value – as a way to lock in customer demand for the country’s crude, Crown Prince Mohammed Bin Salman said in a rare interview on a Saudi TV channel. Tuesday evening. While providing few details on the company involved in the talks, he said the sale could take place within the next two years. “I don’t want to make any promises on finalizing the deals, but discussions are underway right now on a 1% acquisition by one of the world’s leading energy companies,” said Prince Mohammed, the de facto leader. from the country. “I can’t mention the name but it’s a huge business. This agreement could be very important to strengthen sales of Aramco in the country where this company resides. China is the biggest buyer of Saudi oil. Nearly 30% of the kingdom’s crude exports went to the Asian country last month, according to data compiled by Bloomberg. Japan, South Korea and India were the next biggest importers. Besides China, Aramco is keen to make further inroads in India, the fastest growing oil consumption market before the pandemic strikes. But the company faces stiff competition from other suppliers, and Indian refiners are among the most price sensitive in the world, with the crown prince increasingly relying on Aramco, the world’s largest oil company. , to help finance its plan to transform and diversify the Saudi economy. – an initiative called Vision 2030. This effort has come up against obstacles in recent years, with investors frightened by the kingdom’s internal political repression and the murder of Saudi critic Jamal Khashoggi in 2018, then with the Covid-19 pandemic. ‘last year. The initial public offering – in which it sold around 2% of its shares on the Riyadh stock exchange – raised nearly $ 30 billion. The money was transferred to the kingdom’s sovereign wealth fund and was intended to support investments aimed at diverting the largest Arab economy from dependence on oil sales. Since then, Aramco has also taken on debt and has started selling some non-core assets to maintain a $ 75 billion dividend, most of which goes to the state. raised with local investors and wealthy Saudi families. Most foreign investors balked at the valuation and stayed on the sidelines. The sale only brought in a fraction of the $ 100 billion originally planned. Prince Mohammed said the government, which still controls more than 98% of Aramco’s shares, could sell more shares on the Saudi stock exchange , without giving any delay. The state-owned company said in a statement that any decision to sell more shares is “a matter for the majority shareholder, who said they would consider the possibility and timing depending on market conditions. ” get money out of Aramco’s assets. The company announced this month that a US-led consortium would invest $ 12.4 billion in its pipelines. It is also considering a deal for gas pipelines, Bloomberg reported this week. Aramco has separately started a strategic review of its upstream oil and gas assets that could see the company opening them up to foreign investors. Saudi Arabia will likely have to increase its crude production. in addition, to offset demand which is expected to continue to increase over the next two decades, according to the crown prince. As consumers like those in China and India use more, output from producers like the United States and Russia is expected to decline over the next 10-20 years, leaving a supply gap for Arabia to fill. Arabia, said Prince Mohammed. With forecasts that demand will start to decline around 2030 come true, supply will fall even faster, giving Saudi Arabia the opportunity to sell more crude, he said. Prince Mohammed did not say by how much the country plans to increase production. The government said last year that it had asked Aramco to increase its maximum production capacity to 13 million barrels per day, against 12 million currently. The plan “is progressing very well,” CEO Amin Naser said in March, without giving further details on the timeline. Saudi Arabia regularly pumps around 10 million barrels a day and has slowed production this year due to cuts by the OPEC + group. Last year, the kingdom’s economy shrank the most in addition to three decades, according to estimates by the International Monetary Fund. But the outlook has improved since then. The budget deficit is expected to be 4% of gross domestic product in 2021, less than the 12% gap last year. Speaking on the fifth anniversary of the launch of Vision 2030, Prince Mohammed said the country’s unemployment rate will decline as the economy evolves. a recovery in “V”. “Unemployment will fall to less than 11% this year, then it will reach around 10%, then 7% in 2030,” he said in an interview with the Rotana Khalejia television channel. Nationals fell to 12.6% at the end of last year, after peaking at 14.9% in September. Prince Mohammed also spoke of the delicate ties with the United States, where the administration of the President Joe Biden has said he wants to recalibrate a relationship that was a centerpiece of former President Donald Trump’s Middle East strategy. “Neighboring country” “There will never be a 100% agreement between two countries,” Prince Mohammed said. “Between the different administrations of the White House, the margin of divergence could increase or decrease but we agree with the Biden administration” about 90% of the time, he added. Asked about the kingdom’s regional rival, Iran, the crown prince softened his tone compared to the previous one. “Ultimately, Iran is a neighboring country,” he said, adding that the kingdom wanted Iran to prosper but challenges its nuclear program and its support for “We are working today with our partners of the region to find solutions to these problems and we hope to overcome them and have a good and positive relationship with them, ”he said. also said: Some of the government’s shares in Aramco could be transferred to the sovereign wealth fund, known as PIF The PIF will not transfer any of its income to the treasury until 2030 The decision to increase the value added ta x to 15% l ‘last year “will be temporary from one to five years maximum, with a VAT target of 5% to 10%” The kingdom does not intend to introduce an income tax (Updates with the commentary Aramco in ninth paragraph.) 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