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Saudi Aramco will go public to monetize its oil reserves before demand peaks and price collapses for good
What does a country do when in its entire economy is built around a natural resource that the world is starting to shift away from?
In the case of Saudi Arabia, they plan their own shift off oil — financed by the world’s largest initial public offering (IPO) of stock, some 5 percent of Saudi Aramco, the world’s largest oil company.
Last year, deputy crown prince Mohammed bin Salman announced the plan to take Aramco, which the Saudis value at some $2 trillion, public. Last month, the Financial Times reported those plans are on track for an IPO next year, noting that Saudi advisers say a successful IPO “is essential to the deputy crown prince’s radical efforts to wean the kingdom off oil through his Vision 2030 programme.”
The 2014 collapse in oil prices caused a serious economic slowdown in the country, which shattered the faith of many Saudis in the long-term viability of a pure petro-state. “We have a state of addiction in the Saudi Arabian kingdom, by everyone, and that’s dangerous,” the deputy crown prince told Al Arabiya television in 2016. “That is what held up many sectors from developing in the past years.”
The December 2015 Paris climate agreement underscored the risk for the Saudis, as 190 nations (including Saudi Arabia) unanimously agreed to leave most fossil fuels in the ground in an effort to avoid catastrophic climate change. Compounding the problem for oil is the stunning drops in the price of batteries, which is enabling the first serious challenge to petrol cars — affordable, long-range electric vehicles.
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