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For sale: A slice of Saudi Arabia’s oil company

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The national oil company of Saudi Arabia — Saudi Aramco — confirmed it is “studying options” for going public and allowing shares to be bought and sold by investors.

One quick bit of history: Aramco, going back to the 1940s, was actually owned by various arms of the American company Standard Oil, until it was fully nationalized in 1980s by the Saudi government. Is this the start of the state letting go of the crown jewel?

The announcement sparked speculation as to how the company will be valued. Estimates ranged from $100 billion to $10 trillion. Another question: why list now?

Many assume the company, and its owner, the Saudi government, needs money with oil prices low.

“You can hardly think of a more of a crown jewel state company anywhere in the world,” said Robin Mills, head of the Manaar Energy consultancy in Dubai and nonresident fellow of the Brookings Doha Center. “That this has now been raised publicly is huge step and I think that would only have been done with these concerns about the economic and the budget situation.”

Others argue Aramco has plenty of ways to raise money, for instance, borrowing or floating bonds. So the company could be responding to other, broader changes in the global energy economy.

“Decarbonization is a concept that’s playing more into day to day decisions,” said Nansen Saleri, CEO of Quantum Reservoir Impact in Houston and former head of reservoir management for Saudi Aramco. “So Aramco going down this path I see it as a risk mitigation step.”

Saudi’s deputy crown prince told The Economist that listing shares boosts transparency. Public stock exchanges requires regular financial disclosures by listed companies. The Saudi government is also privatizing other sectors of the economy.

But skeptics say there’s no way the company fully opens its books.

“Then there might be questions asked about the level of spending of the royal family,” said Valerie Marcel of the Chatham House think tank in London, “which I think is a very sensitive issue. But also the company’s corporate culture is very secretive. It’s the legacy company that comes from Exxon Mobil. And Exxon Mobil is also a very secretive company.”

One way to stay secret would be for Aramco to offer a small stake of a subsidiary to the public, and “put a ring fence” so the parent company’s financials are never disclosed, Marcel said.

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