When shares in Saudi Aramco will eventually go public, there will be no doubt about it. Jonathan Gornall writes
Jonathan Gornall is a British journalist, formerly with The Times, who has lived and worked in the Middle East and is now based in the UK.
There is a distinct history of critical financial detail, so it's not the world's most conventional investor relations call. It's been three years since Saudi has come to grind the veil of secrecy that normally conceals its activities, so it may have raised the curtain on the fossil fuels era.
Aramco first announced it was planning to go public. Since then, the plan has been on and off again several times, but now it seems to be back on again. Khalid Al Falih has been suggested to sell Aramco shares on the market at some point in the next year and a half.
This company, owned outright by the Saudi government, is gigantic. In 201
So Why, then, is Saudi Arabia looking to offer outsiders a slice of the action?
The most plausible explanation is that, 86 years after Saudi Arabia signed the concession agreement with a US oil company Oil Company and 100 years of Aramco's oil savings are now over the horizon.
On one level, this is terrific news for a planet facing irreversible harm from the impact of fossil fuel consumption. Saudi Arabia is the largest producer of crude oil in the world and analysts believe it plans to use the billions, if not trillions, of dollars renewable-energy sector.
But a Planned Oil is not likely to stay in the ground. Quite as much oil Saudi Arabia is sitting on has always been uncertain. But in January, Aramco released details of the first independent audit of the country's oil reserves. It confirmed that, with 263.1 billion untapped barrels at the end of 2017, Saudi Arabia has the world's largest reserves of crude. Similarly, the company's first and massively oversubscribed international bond issue three months later, which raised $ 12 billion, which is designed to test the appetite and pave the way for IPO.
Of course, none of these potential investors is unaware of the growing environmental pressure on oil and the simultaneous growth in interest and investment in renewable energy sources, which together limit Aramco's long-term prospects. But if they are on the fossil-fuel era, they are still a short-term fortune to be made of oil and gas. 19659004] Regardless of all, this is a momentum in the global switch from fossil fuels to alternative sources of energy. It signals Saudi Arabia's recognition that oil is dying and that it is better to reap a huge dividend from the sale of that asset than it is to steadily diminish until the stock is worthless. It is also likely to stimulate similar strategic thinking among Saudi Arabia's oil-producing neighbors, who may well accelerate their own efforts to simultaneously maximize profits and reduce reliance upon oil.
It is no coincidence, then, that Saudi Arabia has just invited bids for a series of massive solar-energy projects as it starts to ramp up its commitment to renewable-energy targets outlined under the country's vision 2030 plan.
Saudi Arabia is prematurely turning its back on oil; profits from that bounty will continue to flow into the nation's coffers for many years to come. But the fact that it is still in a state of disarray is not the case.
Equally significant, this historic development suggests another, optimistic scenario.
The protectionist tariff barriers that have impeded the the widespread adoption of renewable energy around the world will inevitably fall under the weight of their own ultimate indefinite illogicality, while the cost of solar and other renewables is constantly falling as technologies improve. 344 cities in China are already producing unsubsidised solar-generated electricity at the price of conventionally generated energy.
So the response from the oil-rich states of the Gulf must be imaginative.
This will be done, but can be stored, distributed and exported as efficiently as oil has been a massive, daunting enterprise, demanding huge investment and paradigm-shifting technological breakthroughs, but it wants to be more than worth it. As they were once blessed with oil, the Gulf States are blessed with sunshine, a natural and endlessly renewable asset that can be commoditised in perpetuity – and save the earth into the bargain.