TheEconomistNovember 2nd 2019 611I
n the headquarters of the world’s
most profitable company, past its heavily
guarded perimeter, down a road, through
another security gate, out of the blazing
sun and into a cool office building sit box
after box of rocks. They are samples of an-
hydrite, shale, dolomite and grainstone, re-
trieved from kilometres below ground. A
block of grainstone looks perfectly ordin-
ary, its dark surface dotted with pores. But
nestled in this rock were the remains of the
tiny marine animals and plants which
blanketed the Arabian peninsula before
there was such a thing, over 100m years
ago, and which still give the rock a faint, fa-
miliar scent: oil. “Smells like money,” says
one executive—$111bn, to be precise.
That was the net income earned last
year by Saudi Aramco, the kingdom’s state-
owned oil company. It is nearly twice that
of Apple, the world’s most profitable listed
firm, and more than the combined earn-
ings of the five biggest international oil
companies—ExxonMobil, Royal DutchShell, bp, Chevron and Total. For decades,
the riches from Saudi Arabia’s vast reserves
have been the exclusive property of Saudi
Arabia. Muhammad bin Salman, the king-
dom’s crown prince, wants that to change.
In 2016 Prince Muhammad told this
newspaper he was keen to list a portion of
Aramco’s shares, in an effort to raise money
to diversify the kingdom’s economy. After
much delay, those plans seem to be pro-
ceeding. In September the government ap-
pointed Yasir al-Rumayyan, the head of the
kingdom’s sovereign-wealth fund, to be
the new chairman of Aramco and charged
him with taking the listing forward. Eleven
banks and financial advisers have been
working feverishly to that end. If all goes
according to schedule, in early November
the kingdom will announce its intention to
list 2-3% of Aramco’s shares on the Tada-
wul, the Saudi stock exchange. It would
probably be the biggest initial public offer-
ing (ipo) in history, raising $30bn or more
and eclipsing Alibaba’s $25bn listing in- A second listing may follow on a for-
eign exchange sometime in 2020.
Yet almost four years after Prince Mu-
hammad announced the desire for an ipo,
there remains a chance it is postponed.
Disagreement over the company’s value
has already delayed the listing—Aramco
was expected to announce its intention to
float in late October. It is unclear what price
will satisfy the crown prince, who said in
2016 he hoped for a valuation of $2trn. In-
dependent analysts think he would be
lucky to get $1.5trn.
The uncertainty points to a contradic-
tion at the heart of Aramco, at once the oil
industry’s undisputed titan and a company
plagued by problems. In September drones
struck two Aramco facilities in eastern Sau-
di Arabia, knocking out more than half of
its production. Further attacks are possi-
ble—America says Iran was responsible. In
October Fitch downgraded Aramco’s credit
rating, owing to risks posed by geopolitics
and its economically shaky sovereign. Sau-
di Arabia’s ability to use its heft to support
global oil prices is in doubt. The oil price
has sunk to about $60 a barrel, from $75 in
April, amid fears of a recession.
What is more, investors have soured on
the oil industry. Energy’s weighting in the
s&p500 index dipped below 5% in June,
less than a third of its level in 2008. Oil
markets are notoriously volatile; they may
become more so as efforts to mitigate cli-
The Goliath
DHAHRAN, SAUDI ARABIA
On the eve of its public listing, Aramco is an unrivalled giant in an industry
vexed by challengesBriefing Saudi Aramco