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Saudi Arabia, the world’s largest oil exporter, is considering selling shares in its national oil company, Saudi Arabian Oil Company (Saudi Aramco).

The move comes after a slump in oil prices, which have fallen by nearly 70 percent since May 2014, drove the Saudi government into a budget deficit of nearly $100 billion in 2015.

Saudi Aramco, the world’s largest oil company, has proven oil reserves of about 268 billion barrels of oil or 16 percent of global oil deposits. By contrast, Exxon Mobil, the world’s largest listed oil company, has proven reserves of 25 billion barrels of oil.

Thus, selling a slice of Saudi Aramco, which could be worth trillions of dollars, could raise massive funds for the Saudi government to cover its burgeoning deficit.

Speaking during an interview with The Economist this week, Saudi Arabia’s deputy crown prince, Prince Mohammed bin Salman, said the government is currently reviewing the move to sell shares in Saudi Aramco and a decision would be made in the coming months.

“Personally, I’m enthusiastic about this step,” said Prince Mohammed, who is also the defence minister and chairman of the Council of Economic and Development Affairs, the most powerful policy making institution in Saudi Arabia. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any.”

Prince Mohammed is the 30-year-old son of King Salman, the ruler of Saudi Arabia.
Saudi Aramco produces over 10 million barrels per day, rising to 12 million barrels per day at full capacity. The sheer size of Saudi Aramco gives Saudi Arabia enormous influence over the Organization for Petroleum Exporting Countries (OPEC), which has kept oil production at high levels to maintain market share despite declining oil prices.  

Aside from exploration and production assets, Saudi Aramco also has massive refining assets both inside and outside Saudi Arabia. In 2008, Saudi Aramco listed a subsidiary, Rabigh Refining and Petrochemical Company, on the Saudi stock exchange. The refinery processes 400,000 barrels of oil per day and has a market capitalization of $2.33 billion.

Oil analysts are speculating that given Saudi Aramco’s strategic importance to Saudi Arabia, it is highly unlikely that the company’s vast exploration and production assets would be included in any share sale.

“Officials realize that listing shares in the core business would mean more transparency and more disclosures on finances, production figures, etc.,” a Saudi official told the Wall Street Journal

The potential listing of Saudi Aramco is part of reforms currently sweeping Saudi Arabia as the government prepares for a period of low oil prices. In December, the government announced that petrol prices would rise by 50 percent after the kingdom slashed petrol subsidies.

According to the Financial Times, government officials have started reviewing state-owned companies such as the national airline, airports, and utilities for privatization to raise funds and boost efficiency.

Chibuike Oguh is Financial Nigeria's Frontier Markets Analyst