Aramco in the global spotlight again

Saudi Aramco is back in the news. Aramco the most profitable oil company in the world still faces huge challenges. The financial media informed that Saudi Aramco may be the world’s most profitable company, but that is not likely to succeed in persuading investors that the energy behemoth is worth $2 trillion.

In January, the Saudi Oil Minister said the company will issue an international bond in the second quarter of this year, mostly to fund the acquisition of a majority stake in petrochemicals major Sabic, valued at US$70 billion, but also to tap “multiple sources of capital.” However, the bond issuing has forced Aramco to reveal its accounts to investors for the first time in over forty years. It is widely believed in financial circles that this is a precursor to more transparency for the forthcoming initial public offer scheduled for 2021.

The 470-page bond prospectus has revealed that Saudi Aramco is able to pump a maximum of 12 million barrels a day — as Riyadh has said for several years. The kingdom has access to another 500,000 barrels a day of output capacity in the so-called neutral zone shared with Kuwait. That area isn’t producing anything now due to a political dispute with its neighbor.


Saudi Aramco has obtained the fifth-highest investment grade rating at both Moody’s Investors Service and Fitch Ratings as the world’s largest oil producer prepares for its debut dollar bond offering.

Moody’s rated the oil giant at A1, while Fitch assigned it A+, both with a stable outlook. The two rating agencies explained that the main reason for not giving Aramco the top AAA is the Saudi government’s control of Aramco, the taxation and dividends it pays to the Saudi government.  An AAA-rated bond has an exceptional degree of credit-worthiness because the issue can easily meet its financial commitments.

The rating agencies Standard & Poor’s (S&P) and Fitch Ratings use the AAA to identify bonds with the highest credit quality, while Moody’s uses AAA as the top credit rating. The Financial Times stated that Aramco provided 63% of all government revenues. The interlinkage between Aramco and the Saudi government has reduced Aramco’s net profit per barrel also has negatively impacted Aramco’s international credit rating.  Aramco made $26 per barrel, Royal Dutch Shell made $38 per barrel and the French Total made $31 per barrel.

New financial details revealed Monday by Moody’s Investors Service, show a company that paid $58.2 billion in dividends to the Saudi government last year. Working back from that, the valuation would be closer to $1.2 trillion if investors judge Aramco by the same metrics as other giant oil companies

Aramco’s clout and image suffered a big blow after the killing of Jamal Khashoggi the Saudi dissident last October in Istanbul. The war in Yemen has tarnished the Saudi image and the US Jasta law still hasn’t gone away. JASTA is one of the reasons for Aramco’s withdrawal of its IPO because of the legal implications relating to the 9/11 terrorist attacks. The so-called JASTA (Justice Against Sponsors of Terrorism Act) which the Saudi Oil Minister Khalid al Falih described last year as frivolous lawsuits and litigation, acts as a deterrent for placing the IPO in New York. Pressure is also mounting in Washington to pass the anti-trust law, the so-called NOPEC law “No Oil Producing and Exporting Cartels Act” is aimed at OPEC which is viewed by the Trump Administration as the driver of higher prices.

The western financial press including the Wall Street Journal, Bloomberg and the Financial Times believe the 2 trillion evaluation is too high. Lack of transparency is another problem.

However the listing of Aramco is on track to take place in 2021, Energy Minister Khalid al-Falih said in a recent energy conference, echoing earlier assurances he and Aramco’s chief executive made over the past year.


Aramco is the biggest oil producer in the world. It produces between 10 and 11 million barrels of oil per day, just over 10% of the global supply. Aramco is the most profitable company in the world. It has the largest proven crude oil reserves, some 280 billion barrels and it is the world’s top oil producer. Saudi Aramco operates the world’s largest single hydrocarbon network, the Master Gas System which will distribute 9.6 billion cubic feet a day of gas once the latest upgrade is completed.

Aramco’s 2013 crude oil production total was 3.4 billion barrels. It manages over one hundred oil and gas fields in Saudi Arabia, including 288.4 trillion standard cubic feet of natural gas reserves. Saudi Aramco operates the Ghawar Oil Field, the world’s largest onshore oil field which produces 5 million barrels per day approximately, and the Safaniya Field the world’s largest offshore oil field which produces 1.3 million barrel per day. A recent Bloomberg report said that “Ghawar is able to pump a maximum of 3.8 million barrels a day” – well below the 5 million barrels per day that Western Oil experts always believed.


On top of Ghawar, which was found in 1948 by an American geologist, Saudi Arabia relies heavily on two other mega-fields: Khurais, which was discovered in 1957, and can pump 1.45 million barrels a day, and Safaniyah, found in 1951 and still today the world’s largest offshore oil field with capacity of 1.3 million barrels a day. In total, Aramco operates 101 oil fields.

On Monday Aramco published for the first time in four decades its profit figures. According to the FT, the disclosure of the profits was made in a prospectus aimed at attracting investors in its debut international bond sale which showed it generated $111 bn in net income in 2018. The bond sale to raise some $10 bn for its $69 billion the recent acquisition of SABIC, the Saudi Petrochemical giant.


Prince Mohammed Bin Salman (MBS), 33, revealed the Aramco plan in an interview with The Economist in January 2016 and officials hoped it would raise as much as $100 billion. In 2016 MBS launched his ambitious plans to modernize the economy with his 2030 Vision. The IPO of 5% of Aramco’s market value was one of the main pillars of the 2030 vision. In other words the IPO was at the centre of Vision 2030 Grand Scheme which is the blueprint for an economy based on diversification of the economy, reducing reliance on oil as the main source of revenue, technology, entrepreneurship and spectacular new infrastructure like the building of NEOM, a high-tech city on the Red Sea coast.

Saudi Aramco’s financial data were leaked in April 2018 and according to Bloomberg’s analysts, the company could be valued at $1.2 trillion, significantly lower than the official figure of $2 trillion backed by Saudi officials. It remains unclear whether the IPO will ever go ahead.

Nehad Ismail

Nehad Ismail is a journalist based in the United Kingdom. He writes on the economic issues particularly oil and gas. He has a special interest in the Middle East. He worked 15 years in the oil industry and 6 years in the media. He worked in a newspaper and in a TV channel presenting a political program between 2005 and 2010 (Arab News Network). His articles appeared in many esteemed media. He reviewed more than 12 books.
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