Aramco IPO to go ahead by early 2021

I believe it will be above $2 trillion, Crown Prince Mohammed bin Salman told Bloomberg. (SPA)
Updated 06 October 2018

Aramco IPO to go ahead by early 2021

  • The investor will decide the price on the day. I believe it will be above $2 trillion, says Crown Prince Mohammed bin Salman
  • Saudi Arabia has been planning to float up to 5 percent of Saudi Aramco, the world’s largest national oil company, on the stock market

LONDON: Saudi Crown Prince Mohammed bin Salman said the flotation of Saudi Aramco would proceed by 2021, Bloomberg reported on Friday.

He made the disclosure in a wide-ranging interview with the newswire conducted at the royal palace in Riyadh on Wednesday.

It also touched on his relationship with Donald Trump, plans to invest a further $45 billion in Softbank, the rising oil price, and production of crude along the Saudi border with Kuwait.

His comments bring clarity to what could be the most talked about initial public offering in corporate history and one that is a key plank of the Vision 2030 economic and social reform agenda.

“I believe late 2020, early 2021,” he said, referring to the timing of the IPO. “The investor will decide the price on the day. I believe it will be above $2 trillion. Because it will be huge.”

Saudi Arabia has been planning to float up to 5 percent of Saudi Aramco, the world’s largest national oil company, on the stock market.

In recent months there had been intense media speculation over whether the planned IPO had been delayed, canceled or replaced with a rival deal involving Aramco purchasing Saudi Basic Industries Corporation, the petrochemical giant better known as SABIC.

The Saudi crown prince told Bloomberg that the Saudi government would retain the shares of Aramco after the IPO, instead of transferring them into the sovereign wealth fund as originally planned.

Instead, the Public Investment Fund (PIF) would receive the $70 billion from the sale of its stake in SABIC, plus the $100 billion that country hopes to raise from the Aramco IPO, Bloomberg reported.




The Bloomberg interview also touched on future oil production in the so-called Saudi-Kuwait neutral zone. (Bloomberg)

The interview took place against a backdrop of market concerns over the rising price of oil, caused in part by the reimposition of US sanctions against Iran.

US president Donald Trump has in recent weeks stepped up pressure on OPEC and Saudi Arabia to pump more crude and help to lower the price of oil.

However, the crown prince stressed that the oil price was determined by market forces rather than the actions of Saudi Arabia.

“We never in the history of Saudi Arabia decided that this is the right or wrong oil price,” he said.

“The oil price depends on trade — consumer and supplier — and they decide the oil price based on trade and supply and demand. What we are committed in Saudi Arabia is to make sure there is no shortage of supply. So we work with our allies in OPEC and also non-OPEC countries to be sure that we have a sustainable supply of oil and there is no shortage and that there is good demand, that it will not create problems for the consumers and their plans and development.”

He also clarified that Saudi Arabia had spare capacity of 1.3 million barrels without the need for further investment.

“So in Saudi Arabia we have 1.3 million to go if the market needs that. And with other OPEC countries and non-OPEC countries we believe we have more than that, a little bit more than that. And of course there is opportunity for investment in the next three to five years,” he said.

The Bloomberg interview also touched on future oil production in the so-called Saudi-Kuwait neutral zone — an undefined border area between the two countries.

“There are only small issues that have been stuck there for the last 50 years. The Kuwaiti side, they want to fix it today, before we continue to produce in that area,” he said. “It’s part of the sovereignty issues that are stuck, unsolved, between Saudi Arabia and Kuwait for the past 50 years. And they want to fix it now before we continue to produce from that area. We think a 50-year-old issue is almost impossible to fix in a few weeks. So we’re trying to have an agreement with the Kuwaitis to continue to produce for the next five to 10 years and at the same time, we work on the sovereignty issues.”

The interview also covered recent reports about planned financial aid from Saudi Arabia, the UAE and Kuwait for neighboring Bahrain.

“We cannot walk away from GCC countries. It (the financial package) will cover Bahrain’s needs over five years. We believe they’ve taken really serious reforms in the past year. We believe they’ve made huge progress. They have a super amazing team. I told the Bahraini king and the Bahraini crown prince if you fire any of the people in Bahrain we will hire them next day," he said.


Japan lower house passes US trade deal but auto tariffs still in limbo

Updated 19 November 2019

Japan lower house passes US trade deal but auto tariffs still in limbo

  • There is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts
  • Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years

TOKYO: Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including US farm goods and Japanese machine tools.
But there is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts, casting doubt on Abe’s assurances the deal he signed with US President Donald Trump was “win-win.”
Japan and the United States last month formally signed the limited trade deal to cut tariffs on US farm goods, Japanese machine tools and other products while staving off the threat of higher US car duties.
The government’s proposal to ratify the trade deal will next be brought to the upper house for a vote but its passage in the powerful lower house increases the chances it will come into force in January.
The deal will give Trump a success he can trumpet to voters but Abe has said it will bring as much benefit to Japan as to the United States.
Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years, when the benefits fully kick in. It also estimated ¥212.8 billion of overall tariffs on Japan’s exports to the United States will be reduced.
But the figures were based on the assumption the United States would eliminate its tariffs on Japanese autos and auto parts — a major sticking point.
Without those tariff cuts, the reduction in overall US tariffs on Japanese goods would be a little over 10 percent of the government’s projection, according to an estimate by Japan’s Asahi newspaper and Mitsubishi UFJ Research and Consulting.
After the deal is ratified, Japan and the United States have four months to consult on further talks, and Trump has said he wants more trade talks with Japan after the initial deal.
But Japanese government sources familiar with the talks say the momentum to negotiate a deeper deal appears to have waned for now with Washington preoccupied with talks with Beijing.
“It’s unclear whether Washington seriously wants to continue trade talks,” one of the sources said.
“The question is how much time the United States can allocate for talks with Japan, even if we start negotiations. There’s limited time to conclude talks before the presidential elections.”
Japan and the United States already appear to have different interpretations of what was agreed on car tariffs.
Japan has said it has received US assurance that it would scrap tariffs on Japanese cars and car parts, and that the only remaining issue was the timing.
But Washington has not confirmed that.
US Trade Representative Robert Lighthizer has said cars were not included in the agreement, and that it was only Japan’s ambition to discuss car tariffs in the future.
A US document only said customs duties on autos and auto parts “will be subject to further negotiations with respect to the elimination of customs duties.”
“The deal was left vague on the issue of tariff cuts on Japanese auto and auto parts. Otherwise, we couldn’t have reached the agreement,” another source said.
There is also uncertainty on whether Trump will drop threats to impose steep tariffs on Japanese car imports under “Section 232” that gives him authority to do so on national security grounds.
Abe said he had got an assurance from Trump that he would not do that, though analysts say the president could always change his mind, or at least keep Japan guessing.
Opposition parties have attacked Abe for a deal they say is unfair. Critics say Trump could drag his feet on further negotiations unless he is sure he can win more concessions.
“There’s a chance Trump will put pressure on Japan on trade to appeal to his voters,” said Junichi Sugawara, senior research officer at Mizuho Research Institute. “There’s a possibility he could renew his threat over auto tariffs.”