Saudi Arabia government will retain control of its oil and gas reserves and production through its state energy giant Saudi Aramco, even after its public listing of about 5 per cent stake in 2018, Deputy Crown Prince Mohammed bin Salman said.
The planned initial public offering (IPO) of a stake in Saudi Aramco "will be not be very far off 5 percent", Prince Mohammed said in a Tuesday interview on state television.
Prince Mohammed a year ago launched a series of radical economic reforms including the partial privatisation of Aramco, when he said he expected the IPO would value the state firm at least $2 trillion. Any valuation would account for both oil price expectations and the size of Saudi Arabia's proven oil reserves
“The wells will still be owned by the government,” said Prince Mohammed, the son of King Salman bin Abdulaziz. “The company only has the right to benefit from the wells. This is the same as before, and there are no changes to that.”
Questions remain about the degree of influence investors may have on output -- the government may impose decisions on Aramco to pump less, as it has done since earlier this year.
Production decisions will remain subject to OPEC policies and the global balance of supply and demand, the prince said. Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries, pumping about 10 million barrels a day. Aramco’s crude reserves are estimated at about 260 billion barrels.
"The Saudi government will decide on the production ceiling. It is in the interest of the Saudi government to increase the production, not reduce it," Prince Mohammed said. "The government will not take a decision that goes against its interest or the interest of the company regarding the production."
Riyadh has traditionally kept an "spare cushion" of excess production capacity, allowing it to raise or reduce levels to influence prices according to the government's market strategy. Private oil companies, by contrast, do not hold back output for strategic gain.
The listing of Aramco, expected to be the world's biggest IPO and raise tens of billions of dollars, is a centerpiece of the government's ambitious plan - known as Vision 2030 - to diversify the economy beyond oil. The government in March slashed Aramco’s income-tax rate to sweeten the appeal of what could be a record offering.
"We have two main factors to decide the percentage to be listed ... First the demand, whether there will be demand or not. Second, what do we have in terms of investments in the pipeline inside Saudi or outside," Prince Mohammed said, referring to opportunities to invest proceeds of the IPO.
Aramco will be listed on the Saudi bourse in addition to one or more foreign stock exchanges, Saudi officials have said.
The proceeds from the Aramco sale will help to develop other industries inside Saudi Arabia and will be invested by the kingdom's Public Investment Fund, its top sovereign wealth fund, which will spend more than 500 billion riyals ($133.3 billion) over three years after Aramco's IPO, Prince Mohammed said.