How is Aramco Restructuring?

Saudi Aramco is gearing up to launch its first initial public offering, and this means big changes for the Dhahran-based national petroleum and natural gas company. Primarily, a major overhaul of its non-oil assets.  

To prepare for what could be the biggest IPO in history Saudi Aramco has implemented a series of company restructure projects, including setting up a subsidiary for its multibillion-dollar pension fund. There are also rumours the company could spin off its Aramco Aviation division by launching a joint venture or enlisting the support of a third-party company. Saudi Aramco pulled off a similar move last year when it formed a joint venture with Jacobs Engineering Group, a US-based construction firm that now manages its government infrastructure projects.

Streamlining the world's biggest oil company

So what's spurred the big reshuffle? The restructure is designed to streamline operations and offer clarity on risks, profits and potential. By eliminating offshoot projects investors will enjoy total clarity on what they're investing in, with zero ambiguity over whether profits will be channelled back into oil and gas related interests, or national projects like healthcare and infrastructure. Ultimately, this will make Saudi Aramco easier to value and help win it higher share prices when it goes public.

“This is best practice. It sets up nice clean lines so the money can’t be used for other business activities,” comments a source in a recent interview with Reuters. “Aramco doesn’t only look at its oil and gas related interests but it is also a channel and mechanism for the nation. This drains Aramco’s resources both in terms of money and its core people," adds the source. “If I am an investor I need to be very clear what I am investing into, it cannot be fuzzy.”

Kickstarting Vision 2030

The public listing is set to go ahead in 2019 and will play a key role in helping the government kickstart Vision 2030, an ambitious plan designed to help the kingdom diversify its economy and look beyond oil. US$2 trillion is the minimum value expected to be placed by the IPO, which means sales of just 5% could see US$100 billion channelled into Vision 2030 projects.

It won't be the first time Aramco has supported national development, with Saudi Arabia often tasking the company with funding major government projects like the construction of industrial cities, as well as cultural centres and sports stadiums.

Moving forward, Aramco will be relying on next-generation technology to support its newly reformed company. For an overview of the latest solutions being used to heighten safety and expose toxic compounds don't miss 'Dry Colorimetry Detection for Arsine Quantitation in Gases'.