As the kingdom prepares for its next evolution, Saudi Aramco is central.
But a planned public listing leaves the company, and the country, at risk.
This port, on the calm blue waters of the Persian Gulf, operates with militarylike precision. Black- and red-hulled super oil tankers must ask for permission to load months in advance. Detailed records go back 30 years to trace any vessels that have broken the rules by dumping oil or using substandard equipment. High-tech radars constantly scan for potential troublemakers, like boats sent from Iran.
At the top of the hexagonal control tower, staff dressed in neat white uniforms with officers’ epaulets keep watch, looking over the sweep of countless storage tanks and ships. “If a target tries to hide behind a ship, we can see him,” said Salah al-Ghamdi, the chief pilot at the facility.Thousands of ships depart these waters annually, transporting the wealth of crude beneath the Saudi Arabian desert to gas-guzzling nations. The kingdom accounts for almost one-sixth of world oil exports, and even a minor disruption here could send shudders through global markets.
The state-run oil giant that operates the port, Saudi Aramco, is the economic force behind Saudi Arabia’s transformation into a regional powerhouse. The deep oil reserves, which the company extracts, transports and sells, have made the country an important part of a geopolitical equation that includes the United States, China and Russia. Leveraging its engineering expertise, Saudi Aramco has built schools, roads, hospitals and much of the other infrastructure that girds Saudi society.
As the kingdom now prepares for its next evolution, Saudi Aramco is again central — in a role that leaves the company and the country at risk.
The Saudi crown prince, Mohammed bin Salman, has unveiled an ambitious effort called Vision 2030 to wean the country from its dependence on oil and overhaul the economy. As part of his plan, he wants to sell a piece of the state oil giant to the public, in part to raise money for other investments.
It is one of the mostly highly anticipated initial public offerings, which the crown prince estimates could value Saudi Aramco at $2 trillion. But a stock sale leaves the opaque company more exposed to outside forces, a compromising position for a political beast with a powerful hand over prices at the pump.
With global prices north of $70 a barrel, Saudi Arabia and its oil giant are under pressure to increase production. It could put them at odds with some other nations in Organization of the Petroleum Exporting Countries, which meet this coming week.
“Saudi Aramco has always carried the kingdom on its back,” said Jim Krane, an energy and geopolitics fellow at Rice University’s Baker Institute. “But to support the kingdom in the coming decades, it needs to transform itself.”
In essence, the crown prince wants the kingdom and Saudi Aramco to plan for the day far in the future when the oil age draws to a close. The present is already making the crude business look less attractive. Countries around the world are shifting to renewable power, while technological advances like electric cars are eroding demand for oil.
To diversify, Aramco is building vast new facilities that will turn crude into more profitable petrochemicals, and it is increasingly drilling for gas. It is also working with Google to establish data centers in the kingdom to develop data-analytics and cloud-computing capacity.
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But the initial public offering will draw scrutiny to a company whose inner workings have long been kept out of sight. Pressure from investors, combined with a prince in a hurry to transform his country, could jeopardize the long-term approach that has made Aramco a dominant force.
For two years, a special team has been working with an array of Western bankers and advisers, preparing for how to handle quarterly reporting of results and coordinate trading between stock exchanges. A local Saudi listing seems certain, but London, New York and bourses in Asia are still in the running for a piece.
Amin H. Nasser, Aramco’s chief executive, said in an interview that the company was preparing to list in all those locations. Speaking with a picture of the crown prince in the background, he added, “It makes us ready for any market the government decides.”
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Tag: World , Saudi Arabia