Saudi Prince Says Aramco Valuation Seen at Above $2 Trillion


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. Aramco also has the world’s lowest operating costs and access to “very cheap” financing, he said.

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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,” he 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

The remaining Aramco stake not sold in the IPO, which is now held directly by the government, will be transferred to the country’s sovereign-wealth fund. The fund would have another $300 billion of assets excluding its holdings in Aramco, the prince said at a press conference broadcast later Monday on state television.

“In 2020, I think we will be able to live without oil,” Prince Mohammed said. “We will need it, but we can live without it.”

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Jason Tuvey, an economist focusing on the Middle East at Capital Economics Ltd., challenged that assertion. “I don’t buy into this, I’m afraid,” he said from London. The investment income from the Public Investment Fund will still come largely from Saudi Aramco, Tuvey said. “Aramco at the end of the day is a big oil company, so the government’s revenue will still essentially be dependent on oil.”

The prince said Saudi Arabia has “huge” mining assets it can use to create jobs. The country has 6 percent of global uranium reserves, which is “another oil that we have not exploited,” he said. Saudi Arabia uses only 3 to 5 percent of its mining resources such as gold, silver and phosphate, he said.