Potential Saudi Aramco IPO Wouldn't Include Oil Reserves

Saudi Arabia's potential sale of shares in its state-owned oil giant wouldn't include the kingdom's oil reserves and could be on local or international markets, the company's chairman confirmed in an interview that aired Sunday.

"The reserves would not be sold, but the company's ability to produce from the reserves is being studied," Khalid al-Falih told Dubai-based al-Arabiya TV in an interview from Davos, Switzerland, where the annual World Economic Forum was held.

"The reserves will remain sovereign," said the chairman of the Saudi Arabian Oil Co., better known as Saudi Aramco, adding that options were being studied to reach the best formula for the initial public offering.

Aramco says it has more than 260 billion barrels of proven oil reserves and the equivalent of 50 billion barrels of natural-gas reserves—more than 12 times the largest publicly traded oil company, Exxon Mobil Corp.

Analysts didn't expect the IPO to include oil reserves, and the potential IPO could still create a publicly listed company valued in the trillions of dollars.

Mr. Falih told The Wall Street Journal earlier this month that the share sale could include at least part of the company's exploration and production assets, countering speculation that any IPO would focus solely on its refining and petrochemical arms.

The listing, which could also include stakes in Aramco's refining and petrochemical units, was being studied within the kingdom, and there was no time frame for figuring out the best path, Mr. Falih said. Saudi Arabia is also considering a partial listing on foreign stock exchanges.

The IPO of Saudi Aramco, which is essentially an arm of the government, is being considered as the kingdom faces economic and political challenges on multiple fronts.

A sustained rout in crude-oil prices has dented the Saudis' revenue to the tune of billions of dollars, while it is also carrying out a military campaign in Yemen and is supporting operations to oust Syrian President Bashar al-Assad. Those conflicts have led to serious clashes with its regional rival Iran, with which Saudi Arabia and other Sunni Muslim states have cut off or downgraded diplomatic ties.

The kingdom's economy is also reaching a transition point at which it can no longer grow if it remains dependent on petroleum revenue, consulting firm McKinsey & Co. said in a report earlier this month.

A number of Saudi experts and insiders have said Saudi Arabia wouldn't include its production assets in any listing. Aramco is essentially an instrument of state policy, and its methods and reserves tantamount to state secrets

Talk of an IPO also comes at a tumultuous time for Saudi Aramco. Some oil experts have blamed Saudi Arabia for oil prices that have plunged to levels not seen since 2004, as Aramco pumped more than 10 million barrels a day—a record—last year in a competition with the U.S., Russia and other big players producing at full tilt.

Mr. Falih told al-Arabiya that the kingdom, however, wasn't aiming to destroy shale-oil production.

"In the long run there will be a need for shale oil. There must be a contribution from shale oil and other countries, including low-cost producers such as Saudi Arabia," he said.

Write to Summer Said at summer.said@wsj.com

(END) Dow Jones Newswires

January 24, 2016 20:55 ET (01:55 GMT)

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