Saudi Aramco would sell downstream operations, not upstream

Saudi Arabia is considering selling shares in refining ventures with foreign oil firms but would not offer a stake in the crude oil exploration and production operations of state oil giant Saudi Aramco, sources familiar with official thinking said.
Some Aramco managers have been informed that the company is looking at listing shares in "joint downstream subsidiaries" at home and abroad, the sources said. One option is to create a holding company that would group together Aramco's stakes in the downstream subsidiaries, one source said. Shares in the parent firm would not be offered, he added. "The holding company is the one which could be listed, not Aramco itself," he said, declining to be named because of political sensitivities.
The global energy market has been awash with speculation since Deputy Crown Prince Mohammed bin Salman appeared to indicate in an interview with The Economist magazine last week that Saudi Arabia might sell shares in Aramco, as part of a privatisation drive to raise money in an era of cheap oil. On Friday Aramco, the world's largest oil company, issued a brief statement saying it was considering options including the stock market listing "of an appropriate percentage of the company's shares and/or the listing of a bundle (of) its downstream subsidiaries". Aramco has crude reserves estimated at about 265 billion barrels, over 15 percent of all global oil deposits, so it could become the first listed company valued at $1 trillion or more if it went public, analysts have estimated. But several sources close to Aramco said its massive size, and the confidentiality surrounding it as the main instrument of the kingdom's oil policy, meant the sale of a stake in the parent firm was not being actively considered.
"The government will never give up its crown jewel," said a senior banker in Riyadh.
Instead, authorities are looking at accelerating plans that have been in the works for many years to sell shares in part of Aramco's vast refining and petrochemicals empire, which by itself is estimated to be worth tens of billions of dollars.
A precedent for the sale already exists: PetroRabigh, a refining and petrochemicals venture in which Aramco and Japan's Sumitomo Chemical each own 37.5 percent. It held an initial public offer on the Riyadh bourse in 2008. "The higher priority is to IPO downstream - it would be low-hanging fruit," said Essam al-Zamel, a prominent economic columnist in Saudi Arabia.
Aramco could not be reached for comment on Sunday, a day off for the company's employees.
It is not clear which ventures might be involved in a sale. But the range of candidates is wide; Aramco and subsidiaries own or have an equity interest in over 5 million barrels per day of refining capacity. Its operations include a joint refinery with Royal Dutch Shell in Jubail known as SASREF; a venture with Exxon Mobil in Yanbu known as SAMREF; and its YASREF refinery, which is a venture with China Petrochemical Corp (Sinopec). YASREF has already said it is looking at listing its shares eventually on the Saudi stock market.