Aramco to strike it rich with investors

An old economy company with a huge carbon footprint is about to knock new economy firms off their perch at the peak of market valuations.

Analysts expect Saudi Arabian oil giant Aramco to raise as much as US$40 billion by listing just 1 to 2 per cent of its shares on the local bourse.

At the bankers’ estimated valuation of US$1.5 trillion, Aramco would be worth at least 50 per cent more than the world’s most valuable companies, Microsoft and Apple.

What really sets the listing apart is that as the world moves away from fossil fuels, Saudi Aramco is unlocking value in its oil reserves to invest in diversification of its economy and reduce dependence on oil. Scientists warn that the world must slash carbon emissions by half over the next decade to head off dangerous global warming.

Regulatory approval of the share sale comes about two months after crippling drone and missile attacks on Saudi oil facilities and amid concerns over human rights violations.

But a year after the killing of dissident Saudi journalist Jamal Khashoggi by government agents, investors have returned.

The listing announcement sets up what may be the biggest initial public offering ever, exceeding the nearly US$22 billion that Alibaba, the Chinese e-commerce giant and owner of this newspaper, raised in one day in 2014.

Though demand is slowing, oil production around the world is expected to expand.

Aramco’s chairman, Yasir Al-Rumayyan, said the share-sale announcement represented “important progress” towards delivering “the kingdom’s blueprint for sustained economic diversification and growth”. An international listing has been put off until later.

While investors may focus on how the company has recovered from the devastating drone and missile attacks, climate activists will be seeking assurances that some of the capital raised from listing a global-warming polluter will be invested in combating climate change through development of renewable energy, energy efficiency and carbon sequestration.

This article appeared in the South China Morning Post print edition as: Aramco to strike it rich with investors