Saudi Crown Prince reveals changing scope of Aramco IPO

Crown Prince Mohammed bin Salman has revealed that Riyadh is undertaking a merger of its oil interests ahead of the anticipated flotation of Aramco.

In a wide-ranging interview with Bloomberg News, Prince Mohammed also talked about Saudi Arabia's relationship with the US and the investment outlook for the country's Public Investment Fund.

Prince Mohammed said the acquisition of petrochemical company Sabic by Aramco had knock on effects on Aramco’s planned debut on the stock market.

"You cannot do the IPO of Aramco and then give the shareholders a surprise a year later with a new deal that wasn’t on the road map then," he said. "So it has to be clear. It has to be clear IPO, clear strategy. So that’s why we have to do that before."

Prince Mohammed said that it made no sense to have Sabic as a standalone entity if the two companies were plunged into direct competition in a scenario that Aramco invested heavily in petrochemicals in the future. An IPO of the combined entities made sense but would not happen immediately. The Sabic deal with Aramco is expected to be completed in early 2019.

Saudi Arabia was determined to follow through on the pledge of a sale, which Prince Mohammed expects to take place in “late 2020, early 2021”. The deputy prime minister projected the company would be valued over $2 trillion.

Prince Mohammed sought to address Western concerns over the spike in oil prices over recent months. "The oil price depends on trade – consumer and supplier – and they decide the oil price based on trade and supply and demand," he said. "What we are committed in Saudi Arabia is to make sure there is no shortage of supply."

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“We believe the higher price ... is not because of Iran,” he added. “It’s mostly because of things happening in Canada, and Mexico, Libya, Venezuela and other countries that moved the price a little bit higher. But Iran, definitely no. Because they reduced 700,000 barrels and we’ve exported more than 1.5 million barrels a day.”

Looking to the long term, Prince Mohammed said the outlook for Saudi Arabian operators was positive even after the peak for oil demand declined, as some producers would "fall away" such as Russia. "Oil demand will continue raising until 2030 by above one per cent, one to one and a half per cent, maybe more," he said. "And some believe that after 2030, it will decline."

Turning to the country's broader relationship with the US president, Prince Mohammed spoke of a close partnership. “I love working with him,” he said. “We have achieved a lot in the Middle East, especially against extremism, extremist ideologies, terrorism and [Isis] disappeared in a very short time in Iraq and Syria, and a lot of extremist narratives have been demolished in the past two years, so this is a strong initiative."

On the reform process, Prince Mohammed revealed there had been an 90 per cent bounce in foreign direct investment in Saudi Arabia in the first half of 2018.

Having embarked on an ambitious shake-up of the Saudi state finances, the country could look forward to a period of expansion. "I feel the reforms today have happened," he said. "We did the reforms of gas prices in Saudi Arabia, it’s done. The electricity prices, it’s done. The water prices, it’s done. So the reform, it’s done. The taxes the VAT. It’s done. So there are no reforms in the pipeline coming that we will not do because the oil price is high. It’s already done. It’s there."

With Saudi Arabia’s sovereign wealth fund, Public Investment Fund (PIF), purchasing shares in non-oil entities in an attempt to diversify the nation’s economy, Prince Mohammed offered an overview of its much heralded relationship with Tesla. The electric car company has seen its shares rise and fall in recent weeks as its CEO, Elon Musk reached a settlement with the US SEC over a breach of America's insider trading laws.

Prince Mohammed said he welcomed the introduction of new technology to the streets of Saudi Arabia.

“In one or two years we will have Tesla showrooms in Saudi Arabia. Now we have allowed 100 per cent ownership of foreign investments in Saudi Arabia so Tesla can open and own 100 per cent of their showrooms.”