The power behind the Saudi throne Deputy Crown Prince Mohammed bin Salman appointed a new head of the central bank and sovereign oil firm Saudi Aramco at the end of last week. His comments, delivered in a rare interview to foreign journalists following the announcements, suggest that he is as committed as ever to smashing the record for the largest ever IPO by listing Saudi Aramco, which he values at $2tn. For reference, this is more than five times the size of the largest currently listed oil firm ExxonMobil. Detailed plans are to be presented to Aramco’s Supreme Council “soon”.

Our market is making a 70% probability of an IPO successfully occurring by the end of 2017, which seems like a bargain buy if you only listen to Prince Mohammed.

But, listing just 5% of the firm’s shares would entail raising more than $100bn from investors in a tricky sector. The profitability of the company are beyond dispute – it can currently pump one in eight barrels produced globally at a very significant cost advantage to all its rivals bar Kuwait. It showed that it had the power to crush global oil prices back in late 2014. It could probably put them back up again too. If it wanted.

But Saudi Aramco is not geared to give investors a return, currently handing almost all its profits to the state. Saudi Aramco’s policies currently seem geared to serve Saudi foreign policy rather than generate profit. Security in the Middle East, where all of Aramco’s major assets are located, will remain a concern. As will the sustainability of global demand for oil. As the former Saudi oil minister, Sheik Ahmed Zaki Yamani, was fond of pointing out: “The Stone Age didn’t end because we ran out of stones.”



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