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Aramco IPO Seen by Prince as Tonic for Saudis `Addicted' to Oil

Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said he expects the value of Saudi Arabian Oil Co. to exceed $2 trillion as the kingdom prepares to sell part of the company in what could be the world’s largest initial public offering.

The valuation of the oil producer known as Saudi Aramco hasn’t been completed, Prince Mohammed said in an interview with Saudi-owned Al Arabiya television. The government plans to turn Aramco into a holding company and will sell less than 5 percent of that entity, he said. Aramco units may be offered for sale at a second stage, he said.

“Only the oil reserves could be worth about $2.5 trillion at $10 oil price, so a valuation of $2 trillion for all of Saudi Aramco is quite cheap,” Danilo Onorino, an energy-focused portfolio manager at Dogma Capital SA, said from Lugano, Switzerland. “Add to that the fact that Aramco pays almost no taxes, has the world’s lowest operating costs and has very cheap cost of financing.”

Prince Mohammed is leading the biggest economic shakeup since the founding of Saudi Arabia in 1932, with measures that represent a radical shift for a country built on petrodollars.

2030 Vision

Saudi Aramco’s sale is a key part of the “Saudi 2030 Vision” announced Monday to overhaul the economy and reduce the kingdom’s reliance on oil. It will help increase transparency, he said.

“If Saudi Aramco is listed then it must announce its statements and it will do that every quarter,” Prince Mohammed said. “It will be under the supervision of all Saudi banks, all analysts, all Saudi thinkers. Even more, all international banks and research and planning centers in the world will monitor it intensively.”

Aramco’s crude reserves of about 260 billion barrels are almost 10 times those of Exxon Mobil Corp. Its daily production of more than 10 million barrels is more than the domestic output of every U.S. oil company combined.

Sovereign Fund

“Today, we see a more purposeful Saudi Arabia with whom we will be a partner as it prepares for a future not dependent on oil,” General Electric Co. Chief Executive Officer Jeffrey Immelt said in an e-mailed response to a request for comment. GE supplies Aramco with equipment including gas turbines.

Saudi Arabia can achieve “our national vision” even if the price of oil falls to less than $30 a barrel, Prince Mohammed said. Benchmark Brent crude was trading Tuesday in London at more than $45 a barrel.

“We believe that it is nearly impossible for crude to drop below $30 given the current demand in the world, but this vision will be achieved whether the price is $30 or $28 or $70,” he said at a news conference broadcast later Monday on state television.


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