Saudi Arabia has beaten Nigeria on the Initial Public Offering (IPO) on its oil company as it declared plans to sell shares its entire business in the world’s biggest oil company, Saudi Aramco. The federal government had been foot-dragging on the issuance of IPO for the Nigerian National Petroleum Corporation (NNPC) with the minister of state for petroleum resources issuing a new 2018 date for the scheme. Saudi Aramco however, said last weekend that the IPO was not just in its refining or distribution operations but the entire business.
Saudi Arabian Oil Co., known as Saudi Aramco, will announce “very soon” a list of investment banks and consultants advising it on the initial public offering, CEO Amin Nasser said in Bahrain. It plans to list shares on the Saudi stock market and is also considering foreign bourses in London, Hong Kong and New York, he said. Aramco’s plan to sell a stake of about 5 per cent could value the company in trillions of dollars. “We need to do a lot of internal work to prepare for this listing,” Nasser said.
“We are listing a part of the entire company, and not just downstream,” he said, referring to operations including refining and distribution. Saudi Arabia, under presure from lower crude prices, wants to sell shares in Aramco in early 2018 as part of an effort to generate revenue and reform its economy.
The government hopes to raise about $100 billion from the IPO of its flagship asset. The planned sale, which Deputy Crown Prince Mohammed bin Salman announced in April, could be the world’s largest share offering. “There are no obstacles for the IPO of Aramco,” Nasser said. “It’s going very smoothly, and we are on target.
We achieved a lot of progress so far. People have to appreciate the size of Aramco and its complexity.” The company will review its budget “shortly,” he said. “Our spending program is active and evolving.” Nigeria had earlier unveiled plans to make its first initial public offering of assets owned by NNPC before Kachikwu announced the 2018 date.
“It’s inevitable,” Kachikwu, said in an interview in Abu Dhabi. “Part of the cleaning up process that we’re doing is to prepare for that.” Africa’s top oil producer plans to sell shares in its refining and distribution business and “select” exploration and production assets to the public, he said. NNPC, as the state oil company is known, manages Nigeria’s stakes in joint ventures with international oil companies that pump the country’s crude.
It also operates refineries and a distribution network of depots and pipelines across the country of about 180 million people. With reorganisation, the NNPC is expected to evolve into four efficient business units from more than a dozen that are mostly making losses, and return to profitability, according to Kachikwu. This aspiration will remain a cheer wish if nothing is done on Petroleum Industry Bill (PIB), Adebayo Alamutu, a petroleum engineer told New Telegraph.
“As it stand now, Saudi has beaten us to it again because it must have addressed all the botttlenecks before going to town with the news of IPO unlike here where we announced a date and later shifted the date based on PIB debacle we need to contend with,” he added.
A long-delayed bill to reform Nigeria’s oil and gas industry will probably be passed “quickly” by lawmakers after it was split to separate a “very contentious” fiscal aspect from non-fiscal parts, Kachikwu however, gave assurance. Saudi Arabia is producing oil at near record highs, with output of 10.58 million barrels a day in September.
Aramco cut pricing last Wednesday for its November crude sales to Asia and Northwest Europe and for most of its grades to other regions, in a contest for market share amid a global supply glut. “We are one of the few companies that is still investing. We will continue to invest in our core business.
Our rigs are increasing, and our overall activities are increasing.” OPEC, of which Saudi Arabia is the largest producer, agreed last week in Algiers to trim output for the first time in eight years after crude prices dropped to about half their levels in 2014.
Oil ministers from the Organization of Petroleum Exporting Countries and non-OPEC producers are to meet next week in Istanbul for talks on how to put the cuts into effect. “Saudi Aramco still sees opportunities and is utilising this down cycle to grow its business, especially in the downstream sector and in gas, where we are expanding quickly,” Nasser said.
The company seeks to double its total production capacity for natural gas, including shale gas, from 12 billion cubic feet per day over the next 10 years, he said. “Gas is very important to fuel industries, especially in the petrochemical sector,” Nasser said.
The use of gas in powergeneration and manufacturing also frees up more crude oil for export, he said. Aramco plans to start producing shale gas in late 2017 from the Wa’ad Al Shamal project in the country’s northwestern region. In 2018, it will begin producing at the al-Jafurah basin in the kingdom’s Eastern Province, Nasser said.