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Saudi Aramco plans IPO

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January 8
6:55 AM 2016

Saudi Aramco, world's biggest oil producing company, is planning to go public. The Saudi Arabian government will take a decision soon in this regard. Saudi Aramco will undergo restructuring exercise very soon. In addition to listing some petrochemical and other downstream firms, the Saudi government may also sell some of the stake.

Saudi Arabia state-run company Aramco may get listed on bourse. Saudi Arabia is suffering from the lower oil price below $35 a barrel. Saudi-led Organization of Petroleum Exporting Countries (OPEC) is firm on maintaining the present level of production to keep up its market share. 

Muhammad bin Salman, the kingdom's deputy crown prince and power behind the throne of his father, King Salman, said in an interview with The Economist, the decision would be taken in next few months. "Personally, I'm enthusiastic about this step. I believe it's in the interest of the Saudi market and it's the interest of Aramco," he said. It's forecast to be five percent of stake would be free float in the first phase.

Prince Muhammad further said that the proposed listing would help Saudi Aramco become more transparency. It would also prevent counter corruption. "Another goal would be to promote greater shareholder involvement in Saudi Arabia," said Prince Muhammad.

The listing of Saudi Aramco is aimed at balancing Saudi Arabia's budget. The measure will also take care of challenging situation amid lower oil price. A small stake in Saudi Aramco were placed on Saudi Stock Exchange, then it could influence in a greater way, reports CNBC

Though exact figures of public issue value are not available. It's learnt that first float may be about five percent giving controlling power to the Kingdom. 

Bob McNally, a former senior White House official and founder of Washington-based consultant The Rapidan Group, said: "This is an epochal change in the oil industry. Saudi Arabia is getting ready to ride the oil-price roller-coaster, not control it."

Prince Muhammad bin Salman held two meetings on public issue plan for Aramco. The discussions included selling shares in parent company, which manages oil exploration and production. The meeting also discussed on offering smaller units that operate petrochemical, refining and marketing operations, as reported by Stuff news.

Prince Muhammad became head of the defense ministry and the Council for Economic and Development Affairs about a year ago. He has been active on bringing economic changes to strengthen the Kingdom.
Saudi Arabia is also studying the impact of subsidies in electricity, water and housing segments. It may also seek private sector participation in healthcare and education. The other measures of study also include introduction of five percent of value added tax (VAT) on non-essential goods.

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