Hesitant Saudi Aramco and its privatization challenge – Transparency critical for int’t exchanges
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Since the Saudi oil giant’s announcement to go public, the international press has been raising some crucial questions concerning the public offering of five percent assets by the end of next year.
The press’ questions are related to transparency and complete openness to the public, opening of its books and balance sheets of the last five years, exact numbers of its oil reserves by volume — proven and unproven, and rate of recovery as well as Aramco’s profit and loss accounts.
This information is very critical for New York and London stock markets should Saudi Aramco opt for public offering of five percent assets, which would be worth $100 billion if the total giant company is worth $2 trillion as per Saudi estimates. Again, majority think this is way above the market value, as it is 20 times more than the current ExxonMobil market value and ten times more than that of Apple.
In real terms, it is difficult for the national oil company to go public globally and publish all the information that it had never published before. In fact, none of the companies openly publish their annual financial results and profit and loss accounts. The only organization that publishes its accounts is Kuwait Petroleum Corporation ever since its inspection and auditing by international firms.
As per the international media, there might now be some change in direction due to which further delays can be expected with possible postponement of full public subscription. Instead, it may resort to private selling of part of Aramco’s five percent shares to others on one-on-one basis.
It seems now that Saudi Aramco might seek private negotiations with China to sell part of its five percent shares without having to reveal all of its books including oil reserves and other activities. Should Saudi succeed in negotiating with the Chinese, it will be able to evaluate value of its own assets without having to go completely public and with minimum transparency.
Such a process will lead to further gradual selling on private basis with Russia and other participants including owners of sovereign wealth funds. This will result in successful selling of its five percent assets quietly without big publicity and ensuring all confidential information are kept intact at home.
The last step will be up to Saudi Aramco. Should it offer the remainder in its local Boursa and within domestic rules and regulations? Perhaps that would be the best option available for Saudi Aramco as it would be in line with its current practices. It can avoid all the media publicity and achieve its objectives internally, while realizing its full worth before going public later with improved oil prices.
If it succeeds, other national oil companies will follow suit, and Saudi Aramco should be proud of its wealth of experience quietly.
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By Kamel Al-Harami
Independent Oil Analyst
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