Saudi Aramco plans IPO for joint venture

SAUDI ARABIA, the world’s biggest oil producer last week revealed plans to sell shares in the state-owned energy industry to the public for the first time.

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By  Rhys Jones Published  May 15, 2005

SAUDI ARABIA, the world’s biggest oil producer last week revealed plans to sell shares in the state-owned energy industry to the public for the first time. Saudi Aramco will sell shares in a joint venture it plans to set up with a foreign partner to build an oil refinery designed to process 400,000 barrels a day in Yanbu, on the Red Sea coast, Isam Al Bayat, Aramco’s vice-president of new business development, said. “Anything with an Aramco sticker on it will sell like crazy,” said Khan Zahid, chief economist at the Saudi-owned Riyad Bank. Saudi Arabian Oil, commonly known as Aramco, has been seeking foreign partners for the refinery, which is valued at between US$4 billion and US$5 billion, said Al Bayat. A foreign partner such as one of the world’s major oil companies would lock in customers, he said, guaranteeing revenue in what has traditionally been a volatile business. Aramco has a shortlist of potential partners that includes Asian and US companies. A domestic listing could eventually open up the refinery to foreign investors. Under current law, the Saudi stock market, the biggest in the Middle East, is open only to Saudis or neighbouring members of the Gulf Cooperation Council. But regulators say these laws could be lifted within a few years. Gulf countries are reaping a windfall in oil revenue through record prices. But unlike previous boom times, they are spending more of their earnings at home in publicly traded companies and property rather than in US and European markets, according to analysts. The Gulf states also are opening up their economies as they seek to gain membership in such groups as the World Trade Organisation. The new joint venture refinery will sell “high-quality products to Asia, Europe and the US,” Al Bayat said. Exxon Mobil and Royal Dutch/Shell operate joint venture refineries with Aramco in the kingdom. Kuwait has said it plans to sell shares to its nationals in a new 600,000-barrel-a-day refinery, the biggest in the Gulf.

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