The stock market flotation of Saudi Arabia’s state oil company is likely to be delayed until next year, according to the country’s energy minister, confirming mounting speculation that the world’s biggest IPO was running behind schedule.
Saudi Aramco plans to raise $100bn (£75bn) by selling a 5% stake, dwarfing the $21bn raised by China’s Alibaba Group and valuing the business at $2tn. Stock exchanges in London, New York and Hong Kong have been lobbying for the right to float the company, with Saudi officials repeatedly maintaining it was on track to take place later this year.
In January the firm lauded a royal decree converting Saudi Aramco into a joint stock company, a key step allowing it to have more shareholders than its existing one, the Saudi kingdom.
However, industry watchers have been increasingly sceptical that the timeline was likely to be kept, with British officials saying recently that the 2018 target would be missed. Doubts have also been fuelled by the lack so far of any prospectus for investors.
On Friday, the Saudi energy minister, Khalid al-Falih, appeared to officially confirm a delay. “Most likely it will be in 2019 but we will not know until the announcement has been made,” he told a conference in St Petersburg.
“The timing I think will depend on the readiness of the market, rather than the readiness of the company or the readiness of Saudi Arabia,” said Falih, who added that the company was ready.
The IPO of Saudi Aramco is a crucial part of the Saudi crown prince Mohammed bin Salman’s “Vision 2030”, a plan to diversify the country’s economy away from oil.
One sign that London is a frontrunner to host the flotation is that Saudi Aramco has engaged a reputation firm to see what “key stakeholders” think of the firm.
On Friday the Saudi-dominated oil cartel Opec and Russia signalled the beginning of the end for their production cuts.
For the past 18 months the crude producers, who account for more than 40% of global supplies, have been reducing output to bring supply and demand back into balance.
Oil prices recently hit $80 a barrel, in part because of the Opec curbs but also because of the US reimposing sanctions on Iran and production falling in crisis-stricken Venezuela.
The oil cartel is under pressure from the US, China and India to stabilise prices. Donald Trump said in April: “Opec is at it again.” He tweeted: “Oil prices are artificially Very High! No good and will not be accepted!”
Opec’s secretary general, Mohammad Barkindo, said on Friday that the tweet had sparked a discussion about easing production cuts. “We pride ourselves as friends of the United States,” Barkindo said.
Sources told Reuters that Opec and Russia are likely to increase production by about 1 million barrels a day. The news resulted in oil prices falling back to $77.
Experts said the market had flipped quickly over the past six months from a world awash in oil to one where there are concerns over supplies.
Alan Gelder, the vice-president of oil markets at analysts Wood Mackenzie, said: “All of a sudden you’ve got Opec saying we’ve taken barrels off the market and the International Energy Agency declaring they’ve [Opec hit their target].
“Meanwhile, Venezuela is declining and the market is not sure if that decline will stabilise or keep going. You’ve got an uncertain volume that will be taken off by US sanctions on Iran. And you’ve got the big source of supply in recent years, which is US [shale] production in the Permian [basin], now appears to be infrastructure-constrained.”
The analyst said the signals from the Saudis and Russians made the prospect of oil hitting $100 a barrel – as the French oil giant Total recently said was possible – less likely. Gelder said a meeting of Opec and Russia next month would likely result in them agreeing to increase production.
