Saudi Arabia May Rethink IPO For State-Owned Oil Company After Attacks

Saudi Arabia had been planning to sell off a slice of its state-owned oil company, Saudi Aramco, in a massive IPO. But last weekend's aerial attacks on Saudi oil facilities may scare off investors.

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Saudi Arabia has been planning to sell off a slice of its state-owned oil company. The money would be key for diversifying the country's economy, but now there are this weekend's images of one of the company's key oil installations in flames and smoke after an attack. That's making investors nervous. NPR's Jackie Northam reports.

JACKIE NORTHAM, BYLINE: For the past couple of years, international investors have been tantalized by the hope of getting in on an initial public offering, or IPO, of Saudi Aramco, possibly next year. It's the world's most valuable company, turning a profit of $111 billion last year - almost double that of Apple. Saudi officials predicted it was going to be the mother of all IPOs. Then came the strikes on the Aramco facilities.

JASON BORDOFF: As Saudi Aramco prepares for the largest IPO ever, the physical security of its infrastructure is now a new question that investors are going to have.

NORTHAM: Jason Bordoff is the director of Columbia University's Center on Global Energy Policy. He says Aramco always emphasized its security. That helped create the perception its facilities are safe.

BORDOFF: There is a new question about that, and I think for a successful IPO, Aramco will need to take steps to show that its physical infrastructure is protected, just as it did a few years ago in response to a cyberattack to show that its infrastructure is protected electronically as well.

NORTHAM: Ayham Kamel, the head of Middle East and North Africa at the Eurasia Group, a global political risk consultancy, says investor confidence will largely depend on how fast Aramco can repair the damage from the attacks.

AYHAM KAMEL: If Iran is able to recover quickly from this, I think the message it will send to investors is that we are able to recover from the most significant attacks possible on our facilities. So there can be here what I see as room for damage control.

NORTHAM: The attacks on the oil and gas installations come just days after a major shakeup in the upper echelons of Aramco and in the Energy Ministry. The chairman of Aramco was replaced with an ally of Crown Prince Mohammed bin Salman, who has no experience in the oil industry. The new Minister of Energy is the crown prince's half-brother, who does have a long track record with oil markets. Kamel says the timing of the shakeup was not ideal as the markets like stability and leadership.

KAMEL: Well, I think the transition in Aramco and in the Energy Ministry couldn't have come at a worse time. This is certainly not the first thing you want to handle in the first week on the job, and this is a crisis that's very, very difficult to manage for anyone. The best and most competent leaders in the energy industry would find this difficult to manage.

NORTHAM: But Columbia University's Bordoff says Aramco still has what he calls an incredibly strong leadership team.

BORDOFF: I mean, Saudi Aramco is an incredibly capable and impressive company, and it's going to be attractive to investors, I think.

NORTHAM: The Aramco IPO is critical to the crown prince's long-term strategy to diversify Saudi Arabia's economy and wean the kingdom off its dependency on oil. The crown prince valued Aramco at $2 trillion. Many analysts agreed that figure was inflated, and that was before last weekend's attacks.

Jackie Northam, NPR News, Washington.

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