INTERVIEW: Amin Nasser, Saudi Aramco’s Davos man, spells out blueprint for IPO

Amin Nasser, the president and CEO of Saudi Aramco, had a busy few days at last week’s World Economic Forum (WEF) annual meeting in Davos. (Illustration: Luis Grañena)
Updated 27 January 2019
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INTERVIEW: Amin Nasser, Saudi Aramco’s Davos man, spells out blueprint for IPO

  • Nasser was speaking in a private meeting salon at the Hotel Grischa near the main railway station of Davos
  • Just a few weeks ago, Aramco announced the results of an audit by DeGolyer & MacNaughton, the leading independent expert on the oil industry

DAVOS: Amin Nasser, the president and CEO of Saudi Aramco, had a busy few days at last week’s World Economic Forum (WEF) annual meeting in Davos.

“We had about six hours at the International Business Council, three hours at the oil and gas community, two hours on the climate change initiative — and then about 40 bilateral meetings. In Davos, you make every minute count,” he said.

Nasser was speaking in a private meeting salon at the Hotel Grischa near the main railway station of the Swiss Alpine town. He had a plane to catch, but spent some of his precious remaining minutes at Davos speaking to Arab News — about the Fourth Industrial Revolution, technology, the environment, carbon emissions and sustainability.

But first we talked about the forthcoming initial public offering (IPO) of Saudi Aramco. The planned stock exchange listing of the world’s biggest oil company and the Kingdom’s economic dynamo had been slated for later this year, but that timetable slipped into 2021, as Nasser explained.

Did he feel any sense of disappointment or anticlimax that the IPO had been delayed? “No. What I have to say about the IPO is that a lot of work has been done and the commitment is definitely there. The proof of that is what has already been done by the government and by the company. We have changed the tax rules, made a new concession agreement, changed Aramco into a joint stock company, and introduced a lot of fiscal reforms to facilitate a listing,” he said.

Just a few weeks ago, Aramco announced the results of an audit by DeGolyer & MacNaughton, the leading independent expert on the oil industry, which showed Aramco is sitting on a treasure trove of 263.1 billion barrels of oil within its concession area, higher than previous estimates. That was one of the essential requirements for the IPO.

“Everything that is required for listing is there. If the government decided, it could be done in no time,” he said. So why had it not happened?

Basically, Nasser explained, because an alternative strategic play came into view. Aramco decided there were more pressing priorities, especially a tie-up with SABIC, the Kingdom’s petrochemicals and industrial giant.

“We came to the government and said that our desire is to be the leading petrochemical company globally. We can do that organically or inorganically. We are always looking for opportunities in this field and we have huge investments in petrochem with Dow Chemical and Sumitomo. However, if you want to be the leader, you need an acquisition, a major acquisition. You need a platform, a good platform so you can go global, especially with our decision to have 2 million to 3 million barrels of oil going to petrochemical.

“So we approached the Public Investment Fund (Saudi Arabia’s ambitious sovereign wealth fund) to see if it was interested in selling their shares in SABIC, and they were interested. We have been in discussions with them and we went back to the government and said … based on our governance requirements and regulations, you cannot list Aramco while we are going through a major acquisition. It doesn’t work. That process needs to take its course, and the government said that’s fine. Because also you cannot list and then come in three or four months later and say you’re going to acquire a company. That would have to be in the IPO prospectus.

The deal with SABIC — which is valued in the region of $70 billion — will transform Aramco into a global petrochemicals giant, and will take time to put together.

“We need to close a share-purchase agreement and we’re in discussions now with PIF about that. When we reach an agreement we have to go and seek regulatory and antitrust approval. That will take almost until the end of the year 2019, or maybe a little bit more; we don’t know because you need approval from a lot of countries where SABIC has major operations. SABIC is not a small company, it’s a huge company, so you need a lot of approvals from lots of countries,” he said.

“After you finish that you need a minimum of one year to reflect the purchase in your balance sheet. It has to be consolidated and show what is the impact on our balance sheet — where is the integration, where is the value, because the investors will want to see … After that you can go to the market,” he said.

“It’s going to happen. There is no doubt the commitment is there, and it was also further confirmed by the Crown Prince Mohammed bin Salman and by the Minister of Energy Khalid Al-Falih. Both of them say the commitment for the IPO is there,” he insisted.

But Nasser admitted the issue is how to fund the SABIC acquisition, which will be the biggest takeover ever in the Middle East.

“We have different funding mechanisms to finance it. We have our cashflow, and also other funding mechanisms like the bond market, and other tools that are needed for a sustained capital program. So all of these financial tools will be utilized as soon as we reach an agreement,” he said, without disclosing the amount of the bond issue. It will be Aramco’s first foray into global debt markets, but Nasser was encouraged by the recent enthusiastic response toa $7.5 billion bond the Kingdom raised.

The upcoming Aramco bond will take place amid market conditions that were the subject of much gloomy prognosis in Davos. The thought-leaders at the WEF see turbulence in global economic and financial markets in 2019, and worry about the trade “war” between the US and China, and other global economic disruptions.

The implications for the oil markets are obvious. An economic slowdown in China and other big economies would sap the appetite for oil and gas, and potentially lead to a price fall for the Kingdom’s most precious asset.

However, based on his conversations in Davos, Nasser did not appear over-concerned about global economic forecasts.

“It’s our view that the market, in terms of global inventories, is moving toward staying within the five-year average. That’s a sign of balanced-out tightness of supply and demand, which is very important. We are optimistic about the market in 2019 in terms of pricing and in terms of tightness of supply-demand. The more it is balanced, the better for the market. And our view is that there is still healthy demand,” he said. He reckoned there was only a 15 percent chance of a global recession in 2019.

“So far China is healthy in terms of demand, as reflected in imports from Saudi Aramco, and it has been growing. Asia in general is a major market — it is the epicenter of demand in terms of global energy right now, and there is a lot of growth. China and India are very important for us,” he said.

So that leaves the way clear for Aramco to get on with its core long-term strategy — to be a global leader in oil, gas, petrochemicals, refining and energy trading — as well as a pioneer in energy technology.

Aramco is already one of the dominant forces in the global oil industry, of course, helping to set the price of crude through its supply deals with other oil producers. But its immediate ambitions are in gas, where it has so far played a lower-profile role globally. Nasser wants to change that, especially in terms of domestic Saudi consumption.

“By 2030, 75 percent of the utilities sector (in the Kingdom) will be on gas, and the rest will be renewable and nuclear alternatives. So we will have gas going outside the Kingdom to export markets, either by pipeline or by LNG. So (we) will be exporters for the first time,” he said.

Aramco is looking at potential deals in the international gas business, with potential partners in Russia, the US and Australia, he said, adding: “We will be a global leader in gas from within the Kingdom, but we are also looking to be a major player globally.”He is also said to be considering acquisitions in the US shale gas industry. “We have no interest in shale oil ... we have plenty of conventional oil at a much lower cost. But we are interested in gas, let me put it that way,” he said.

At Davos, one of the major themes was the challenge posed by climate change, and Nasser was keen to point out that Aramco is among the “best in class” of the big energy groups. He welcomed a recent academic study that classed Saudi Arabia as the second best in the world among energy producers for carbon intensity in upstream emissions, second only to energy minnow Denmark and way ahead of the other big producers, the US and Russia.

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MORE ARAMCO NEWS FROM DAVOS

Saudi Aramco’s Amin Nasser warms the night in glittering Davos reception

Saudi Aramco chief sets out roadmap for share sale in 2021

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Technology is key to Aramco’s future as a clean energy company. While at Davos, the company was recognized as a technology leader for its gas plant at Uthmaniya, the only energy producer in the world to receive the WEF’s “Lighthouse” award for technology innovation.
“Aramco is already in the era of the Fourth Industrial Revolution,” Nasser said.

The company is investing heavily in technology across 12 centers globally, each looking at aspects of innovation in energy conservation, fuel formulation, engine technology, and carbon capture.

Nasser sees a big role for alternative and renewable energy sources, but thinks that the challenge to the traditional energy business from the electric vehicle industry has been overstated.

He pointed out that there were only 5 million electric vehicles (EV) in the world today, which roughly amounted to the displacement of just 50,000 barrels of oil out of a total global consumption of 100 million barrels. Many of those EVs are, of course, running on power generated by the highly polluting coal industry.

“You do the math. Our view on EV is that it will continue to grow and it will be a great growth story. However, we firmly believe that by 2040 we will need to use all sources as part of the energy mix to supply the world.”

By then, if all goes to the strategy set out by Nasser and the Saudi energy minister, who is also chairman of Aramco, the world’s leading oil company will be a public-listed corporation, a global leader in the energy industry and a champion of digital industrial technology. But Nasser insisted it would remain true to its roots as the fountain of the Kingdom’s fortunes.

“We try to make sure that, wherever you operate, you add value to the community that you are in. There is a lot of emphasis on taking care of all our stakeholders, as well as our shareholders,” he said.


Saudi Arabia launches company to transform Asir into global tourism hub

Updated 14 November 2024
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Saudi Arabia launches company to transform Asir into global tourism hub

RIYADH: Saudi Arabia’s Asir region has launched a new tourism venture through a partnership with the aim of creating a holding company to transform the area into a global tourist destination.

The collaboration between Aseer Investment Co., a subsidiary of the Public Investment Fund, and Rikaz Real Estate, aligns with the goal of transforming Asir into a world-class tourist destination that combines authentic heritage with sustainable development, according to the Saudi Press Agency.

The holding company seeks to contribute to enhancing a tourism environment that enriches guests’ experiences with unique offerings, connecting visitors to local culture and community traditions, SPA reported.

It is also committed to promoting sustainable tourism by protecting the environment, developing local communities, and collaborating with artisans and local businesses to preserve the authenticity of Asir’s heritage.

In October, the Kingdom’s Abha city secured a new investment partnership to boost tourism by developing culturally rich dining and retail experiences. 

PIF firm Aseer Investment Co. signed the deal with Nimr Real Estate and the National Co. for Tourism, or Syahya, to propel the project, the Saudi Press Agency reported. 

This aligns with the objectives of developing Abha, which will offer a range of benefits, including retail stores that reflect the cultural heritage of the Asir region.

The partnership also seeks to be a model for multiple collaborations with private sector investors and create more regional job opportunities.

Investments in the region are expected to create between 14,000 and 18,000 job prospects and contribute to up to 6 percent of the non-oil gross domestic product within 10 years, as outlined by AIC Chief Executive Osama Al-Othman in February.

Saudi Arabia emerged as a leader in tourism growth among G20 nations, experiencing a 73 percent increase in international visitors in the first seven months of 2024 compared to 2019.

According to the UN World Tourism Barometer report in September, the Kingdom welcomed 17.5 million international tourists during this timeframe, showcasing its growing allure as a global travel destination.

This surge is part of the nation’s Vision 2030 initiative, which aims to diversify the economy and reduce dependence on oil revenues.

“Saudi Arabia cements its global leadership and takes the first spot among G20 countries in international tourist arrivals growth, with a 73 percent increase in the first seven months of 2024 compared to the same period in 2019,” stated the Saudi Tourism Ministry on X.

Under the National Tourism Strategy, the Kingdom aims to attract 150 million visitors by 2030 and increase the sector’s contribution to the nation’s gross domestic product from 6 percent to 10 percent.

These goals reflect the country’s commitment to strengthening its tourism sector and enhancing its global appeal.


IMF, Saudi Arabia announce new annual conference tackling global economic challenges

Updated 14 November 2024
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IMF, Saudi Arabia announce new annual conference tackling global economic challenges

RIYADH: The International Monetary Fund and Saudi Arabia will jointly organize a high-level annual conference in AlUla to discuss global economic challenges, it has been announced.

The AlUla Conference for Emerging Market Economies will bring together a select group of finance ministers, central bank governors, and policymakers, along with leaders from the public and private sectors, representatives from international institutions, and members of academia.

According to a joint statement by Kristalina Georgieva, managing director of IMF and the Minister of Finance Mohammed Al-Jadaan, the first edition of this series will be held from Feb. 16-17, 2025.

“The world is confronting deeper and more frequent shocks, including from conflicts, geoeconomic fragmentation, pandemics, climate change, food insecurity, and the digital divide,” according to the statement.

They continued: “If not addressed adequately, these shocks put at risk emerging market economies’ hard-won improvements in living standards. Such setbacks would affect large segments of the world population and put at risk global growth and macro-financial stability.”

The gathering will offer a platform to exchange views on domestic, regional, and global economic developments and discuss policies and reforms to spur inclusive prosperity and build resilience supported by international cooperation.

Recent economic issues affecting the global landscape include rising inflation rates, driven by supply chain disruptions and increased demand for goods post-pandemic.

Supply chain delays continue to impact the availability of essential products, causing bottlenecks in manufacturing and increasing costs.

Additionally, geopolitical conflicts, such as the war in Gaza, have disrupted energy supplies and food exports, leading to global food insecurity and fuel price volatility.

Concerns over the using the Red Sea shipping lane increased dramatically at the end of 2023, when Houthi militants stepped up attacks on vessels in the wake of the escalation of the Israel-Hamas conflict.

The effects of these challenges pose significant risks to economic stability, especially for emerging markets that are more vulnerable to such global shocks.

The AlUla conference is the latest example of the growing relationship between Saudi Arabia and the IMF, with the organization in April establishing its first office in the Middle East and North Africa region in Riyadh.

The facility was launched during the Joint Regional Conference on Industrial Policy for Diversification, jointly organized by the IMF and the Ministry of Finance, on April 24.

The new office aims to strengthen capacity building, regional surveillance, and outreach to foster stability, growth, and integration, thereby promoting partnerships in the Middle East and beyond, according to the Saudi Press Agency.

The work hub will promote closer collaboration between the IMF and regional institutions, governments, and other stakeholders, according to the SPA report.

The IMF also expressed its gratitude to the Kingdom for its financial contribution aimed at supporting capacity development in member countries, including fragile states.


Closing Bell: Saudi Arabia’s TASI ends in the red, trading volume hits $2.95bn

Updated 14 November 2024
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Closing Bell: Saudi Arabia’s TASI ends in the red, trading volume hits $2.95bn

RIYADH: The Tadawul All Share Index concluded the last session of the week at 11,791.18 points, down by 139.27 points or 1.17 percent.

The MSCI Tadawul 30 Index also saw a decline, dropping 19.18 points to close at 1,481.36, reflecting a 1.28 percent loss. In contrast, the parallel market Nomu finished Thursday’s trading at 29,467.71 points, up 262.18 points or 0.90 percent.

TASI reported a trading volume of SR11.10 billion ($2.95 billion), with 51 stocks advancing and 182 declining. The top performer of the day was Saudi Cable Co., which saw its share price surge by 5.10 percent to SR92.70.

Other strong performers included Shatirah House Restaurant Co., which gained 3.75 percent to reach SR21, and Arabian Mills for Food Products Co., which rose by 3.08 percent to SR53.60. Naseej International Trading Co. and Saudi Real Estate Co. also posted notable gains.

The worst performer was Saudi Real Estate Co., which dropped 4.94 percent to close at SR10. Alkhaleej Training and Education Co. and Red Sea International Co. also suffered significant losses, with their share prices falling by 4.90 percent to SR29.10 and 4.84 percent to SR68.80, respectively. Astra Industrial Group and Al-Omran Industrial Trading Co. were also among the day’s largest decliners.

On the parallel market, Nomu, Alqemam for Computer Systems Co. was the top gainer, rising by 9.57 percent to SR103. Other gainers included Dar Almarkabah for Renting Cars Co., which climbed 9.10 percent to SR42.55, and Horizon Educational Co., which rose by 7.58 percent to SR79.50. Mulkia Investment Co. and Knowledge Tower Trading Co. also saw significant increases.

On the losing side of Nomu, WSM for Information Technology Co. recorded the largest drop, with its share price falling by 6.18 percent to SR44. Osool and Bakheet Investment Co. and Natural Gas Distribution Co. also experienced notable declines, with their shares dropping by 5.37 percent to SR37.85 and 5 percent to SR57, respectively.

 


Leaders stress urgent need for climate finance at COP29 ministerial dialogue

Updated 14 November 2024
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Leaders stress urgent need for climate finance at COP29 ministerial dialogue

RIYADH: Global climate finance continues to fall short of expectations, as leaders gathered at the COP29 Ministerial Dialogue on Climate Finance to address ongoing challenges and map out next steps.

The meeting, held in Baku, Azerbaijan, underscored the urgent need for increased and more effective funding mechanisms. COP29 President Mukhtar Babayev emphasized that climate finance plays a central role in the broader negotiations.

“The urgency of the situation is evident,” Babayev remarked, pointing to the severe impacts of climate change observed over the past year. “Recently, we witnessed catastrophic flooding in Spain, and in the Pacific region, island communities are faced with the possibility of being wiped out entirely. We must act now; failure to do so will have grave human and economic costs.”

The president stressed the importance of fulfilling the $100 billion-per-year commitment made in Copenhagen and reiterated in Paris, urging leaders to reflect on lessons learned and consider the quality and allocation of financial resources.

Developing countries once again voiced the need for tangible action, with Fiji’s Deputy Prime Minister Biman Prasad highlighting the importance of aligning climate finance with the goals of the Paris Agreement.

“This is a ‘put your money where your mouth is’ moment,” Prasad said. “The 1.5°C temperature goal and the Paris Agreement itself will not be deliverable from both an economic and scientific perspective if we do not invest right. The New Collective Quantified Goal is critical for aligning our priorities and addressing major inconsistencies,” he added.

The EU reaffirmed its commitment to climate finance, noting that the $100 billion goal was first collectively met in 2022, with contributions reaching $115.9 billion.

“The EU and its member states contributed €28.5 billion, or around $30 billion, in climate finance from public sources,” a representative said. “Almost half of the public funding came in the form of grants, with a significant portion provided on concessional terms. We need to make further efforts to facilitate the mobilization of private funding, as it remains a key source of climate finance,” the representative added.

Simon Stiell, executive secretary of the UN Framework Convention on Climate Change, emphasized the critical juncture at which the global community now finds itself.

“The huge opportunities we have and the terrible risks we face are real,” Stiell said. “It’s time to take action to bridge gaps, solve problems, and come together to ensure climate finance and climate action benefit everyone.”

Sweden also announced a significant new contribution, with Ministerial representatives unveiling an $8 billion Swedish krona ($723.6 million) pledge to the second replenishment of the Green Climate Fund.

“This makes Sweden the largest per capita donor to the GCF among the larger donors,” the Swedish representative noted.

As discussions progressed, leaders acknowledged the widening gap between current financial commitments and the funds required to meet the 1.5°C target. There were calls for more robust mobilization of both public and private finance.

The COP29 president concluded: “Delivering the climate fairness that developing countries need is one of the main metrics of shared success. We can learn from past efforts to inform the road ahead, but significant determination and leadership from all parties are required to bridge these critical gaps.”


IsDB, multilateral banks aim for $120bn in annual climate finance by 2030

Updated 14 November 2024
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IsDB, multilateral banks aim for $120bn in annual climate finance by 2030

RIYADH: Multilateral development banks are aiming to mobilize $120 billion annually by 2030 for climate financing in low- and middle-income countries, according to recent projections.

This ambitious funding goal includes $42 billion dedicated to climate adaptation efforts, with an additional $65 billion expected to come from private sector investments.

The target was unveiled in a joint statement issued during COP29 in Baku, Azerbaijan, by several prominent MDBs, including the Islamic Development Bank, African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Development Bank of the Council of Europe, the European Bank for Reconstruction and Development, and the European Investment Bank. Additionally, the Inter-American Development Bank, the New Development Bank, and the World Bank Group are part of the initiative.

The statement emphasized that setting a strong, collective climate finance target is crucial to meeting the goals of the Paris Agreement.

“A new collective quantitative target on climate finance that is both strong and ambitious is essential to achieving the Paris Agreement’s objectives,” the statement read. “We urge parties to reach a robust conclusion on this target.”

For high-income countries, the MDBs have set a target of $50 billion in annual climate finance, including $7 billion specifically for adaptation, with private sector mobilization expected to generate an additional $65 billion. This new target builds on the success of previous climate finance goals, with MDBs already surpassing their climate financing projections for 2025. Since 2019, the MDBs have increased direct climate finance by 25 percent and doubled climate mobilization efforts over the past year.

In response to the urgent need for enhanced climate action, the MDBs also emphasized the importance of establishing a new collective quantitative target for climate finance at COP29. The institutions highlighted their commitment to ensuring that the finance provided leads to meaningful, measurable impacts on both climate mitigation and adaptation.

To further enhance the effectiveness of climate finance, the MDBs released the “Common Approach to Measuring Climate Outcomes,” a framework that provides standardized indicators for tracking global progress on climate mitigation and adaptation. This framework aims to better align MDB activities with global climate goals and improve transparency in measuring outcomes.

Additionally, the MDBs published their “Country Climate Action Platforms,” reaffirming their commitment to strengthening collaboration between host countries, MDBs, donors, and the private sector. These platforms are designed to ensure that climate finance is targeted effectively and that developing countries have the support they need to implement robust climate policies.

COP29 has emerged as a critical moment in global climate negotiations, especially for the Global South, where developing nations are pushing for significant climate financing, stronger adaptation measures, and equitable policy outcomes. These countries continue to advocate for a climate finance framework based on the principle of common but differentiated responsibilities, recognizing that nations’ contributions should reflect their respective capabilities and historical responsibilities.