The week in energy: Changing Saudi Arabia

The week in energy: Changing Saudi Arabia:

"Eighty years ago, on March 4 1938, Ed Skinner, a manager with the Bahrain Petroleum Company, received one of the most momentous telegrams of the 20th century. The Western Union wire sent to his office in San Francisco brought good news about the company’s new Dammam well No. 7 in eastern Saudi Arabia: it was flowing oil at 1,585 barrels a day. The discovery was the first to hint at Saudi Arabia’s vast reserves, and a portent of the critical importance that the kingdom would have for the world economy. The nearby Dammam camp for the families of the oil workers would grow into the city of Dhahran, where Saudi Aramco has its headquarters. That cable served notice that the world was going to have to pay attention to Saudi Arabia, and the scrutiny continues to this day. Saudi Arabia may have fallen behind the US as an oil producer, but it remains the largest crude exporter. The planned international IPO of Saudi Aramco is the subject of intense interest, not just because it could be the largest such sale in history, but because it is a flagship project for the wider economic reform programme led by Crown Prince Mohammed bin Salman. The FT reported this week that the proposed timetable for that IPO, which had been scheduled for this year, seemed to be slipping, which always seemed a possibility given the difficulties it faces. The greatest benefits that would flow from an international listing — more transparency, more accountability for management, the discipline imposed by independent shareholders — are precisely the issues that present some of the biggest challenges. Javier Blas of Bloomberg reported that Saudi officials had received a “cool response” from US fund managers when informally pitching the IPO at meetings in New York and Houston. Khalid al Falih, the kingdom’s energy minister, raised the threat of lawsuits over climate change as a specific reason to be wary of a New York listing. Both the FT’s Lex column and Liam Denning at Bloomberg Gadfly suggested achieving the $2tn valuation sought by the Saudi government would not be easy, wherever the international listing is attempted."



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