Saudi’s Aramco reveals IPO ambitions for 2021

Aramco's decision to enter the downstream business in Saudi Arabia may pay dividends for Riyadh.

Aramco’s decision to enter the downstream business in Saudi Arabia may pay dividends for Riyadh once shares in the oil giant come up for sale, expected by 2021.

The Saudi national energy company’s decision to form the Saudi Aramco Retail Company (RetailCo), in a bid to sell fuel at its own domestic of petrol stations, came shortly after Adnoc Distribution, Abu Dhabi’s national energy company, started its operations in the kingdom.

Downstream market competition

The entry of two of the world’s largest energy producers into the kingdom’s retail fuel arena – considered by many as being large but loosely managed – is expected to infuse much-needed competition among the service providers.

Market competition is expected to ensure that motorists in Saudi Arabia are guaranteed premium fuel grades and quality retail services at fair rates petrol stations around the kingdom.

Kingdom’s Vision 2030 goals

RetailCo also promises to create numerous jobs across the country for the local workforce, thereby enabling Saudi Aramco to perform its key role in driving socioeconomic development as part of Riyadh’s Vision 2030 goals.

The most enticing prospect for Aramco, however, is that it could consider floating shares of RetailCo as a way of achieving its stock listing promise.

The original Aramco privatisation plan, as announced by Saudi Crown Prince Mohammed bin Salman in January 2016, outlined Riyadh’s desire to float shares in Aramco’s downstream business while leaving the firm’s core upstream operations untouched.

Aramco IPO, Sabic and 2021

In October 2018, the crown prince revealed plans to let Aramco complete the acquisition of Saudi Basic Industries Corporation (Sabic), a full year after which the process of rolling-out Aramco’s initial public offering (IPO) would begin.

The expectation is that by 2021, RetailCo will have completed two years of operations and will be functioning under Aramco’s downstream unit, which by then will have comfortably brought Sabic within its fold.

Further, it is expected that when the time for a potential IPO comes, RetailCo’s value proposition will have dramatically improved, giving Aramco the opportunity to float its shares at home and abroad – thereby fulfilling its plan and avoiding the need to sell stakes in its core upstream or downstream units.

The precedent set by Adnoc, when it offered 10 per cent of Adnoc Distribution’s shares on the Abu Dhabi Stock Exchange in December 2017, would suggest that Aramco could achieve something similar.

This article is sourced from Power Technology sister publication www.meed.com, a leading source of high-value business intelligence and economic analysis about the Middle East and North Africa. To access more MEED content register for the 30-day Free Guest User Programme. https://www.meed.com/registration/

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