Saudi Aramco pushes ahead with IPO of oil-trading unit

Matthew Martin, Dinesh Nair, Anthony Di Paola and Archana Narayanan October 20, 2022

(Bloomberg) — Saudi Aramco is pushing ahead with plans for an initial public offering of its energy-trading business, which would rank as one of the largest share sales this year, according to people familiar with the matter.

The world’s largest oil company is working with advisers for a listing in Riyadh for the end of the year or early 2023, the people said, asking not to be identified as the matter is private. Aramco is in the process of adding more banks to the IPO, which could value the unit at more than $30 billion, the people said.

It has appointed three Wall Street firms as main advisers already, Bloomberg News reported in May. No final decisions have been made and the IPO could be delayed or canceled if market conditions worsen, the people said.

Aramco declined to comment.

Saudi IPO Demand

While the global IPO market has suffered due to weakening economies and rising interest rates, there’s still plenty of appetite for deals in Saudi Arabia, which is the fastest-growing of the G20 group of major economies. Arabian Drilling Co., an oilfield-services firm, attracted $43 billion in orders for its listing this month.

Aramco, controlled by the Saudi Arabian government, is mulling the deal at a time when other national oil companies in the Persian Gulf are also seeking to build their trading businesses. Abu Dhabi National Oil Co. is considering buying all or part of Gunvor Group, in what would be one of the commodity-trading industry’s biggest deals in years, Bloomberg reported last month. Gas giant Qatar Energy wants to expand its trading activity, albeit organically rather than through acquisitions, its chief executive officer said this week.

It marks a change for Middle Eastern petrostates, which have traditionally stuck to a simple model of pumping crude and exporting it. Now, they’re looking to boost profits by moving into more lucrative areas of the market.

Western energy majors including Shell Plc and TotalEnergies SE have in recent decades built trading arms that sometimes earn billions of dollars annually, but have tended to reveal little about their operations.

Aramco’s IPO plan also comes amid escalating tension between Saudi Arabia and the US. The Biden administration reacted angrily to this month’s decision by OPEC+ -- an oil cartel led by Saudi Arabia and Russia -- to cut production.

Established in 2011, Aramco Trading Co. buys and sells everything from crude oil to diesel and liquefied natural gas. In 2020, it traded around 5 million barrels a day of crude and refined products, and wanted to increase that to 6 million by 2023, according to Ibrahim Al-Buainain, then head of the business. That would put the company among the world’s biggest energy traders.

This year, Al-Buainain became head of Aramco’s sales and trading division. Mohammed Al-Mulhim, the new chief executive officer of Aramco Trading, reports to him.

The parent company sold around 2% of its shares in 2019. It was the world’s biggest initial public offering, though many major international investors didn’t buy the stock because they felt the pricing was too expensive.

Aramco pumps around 11 million barrels of crude each day and it’s valued at $2.1 trillion, second only to Apple Inc. among global companies.

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