Saudi Aramco eyes $2trn IPO valuation

Saudi Arabia will float less than 5% of state oil giant Saudi Aramco, crown prince Mohammed Bin Salman has confirmed after approval by the kingdom's cabinet.

An initial public offer of Saudi Arabian Oil Company is likely to value it at between $2trn and $2.5trn, Prince Mohammed said, making it the world’s largest every flotation.

However, the valuation of Aramco, as it is better known, has not yet been completed, though as an indication, its 260bn barrel reserves positively dwarfs the combined 30bn barrels claimed by BP and Shell.

The IPO is expected to come by the end of 2018.

The Saudi cabinet gave the green light to an economic reform plan known as Vision 2030 which included turning the oil production behemoth into a holding company with publicly listed subsidiaries and an elected board.

Prince Mohammed's Vision 2030 plan is designed to turn the kingdom from the world’s top oil exporter into a global investment powerhouse.

He said the idea was to set up a $2trn sovereign wealth fund, with part of its assets will coming from the sale of a small part of Aramco, whose advisers have already begun meeting with potential institutional investors.

The prince, who is second in line to the throne, claimed the Kingdom will be able to live without its "addiction to oil” in 2020, and stressed that the economic vision would not be derailed if the oil price recovers strongly.

One of the measures to improve Saudi's investment environment, a 'green card' system will be introduced within five years to give more rights to resident expats in the kingdom.

Vision 2030 also include plans for a military holding company that will initially fully owned by government before being offered in an IPO by end of 2017.

Saudi Arabia, as the prime force behind the Organization of the Petroleum Exporting Countries (OPEC), has been behind the oversupply that has led to the sharp depreciation in the oil price as the cartel looks to force out higher-cost producers elsewhere in the world.

In December Opec said it expected oil prices to reach $70 per barrel by 2020.