Decision to rule out UK and Hong Kong would be major blow to both financial centres

This article is more than 1 year old

This article is more than 1 year old

Saudi Arabia’s revived plans for a $2tn mega-listing of its state oil company may rule out the London Stock Exchange amid Britain’s rising political uncertainty, according to reports.

Saudi Aramco, the world’s most profitable company, may instead look to Japan’s Tokyo stock exchange to host the second phase of what would be the biggest public offering in history.

The oil giant’s advisers had originally favoured an international stock market debut in either London or Hong Kong but political instability has reduced their appeal, according to the Wall Street Journal.

The report said people familiar with Saudi Aramco’s plans expect the company to split the listing into two stages; the first on the Saudi stock exchange later this year, and the second in 2020 or 2021.

The decision to rule out London and Hong Kong would prove a major blow to both financial centres, which have courted the mega-float since it was first announced in early 2016.

Last year the UK’s City watchdog changed its listing rules, in a move widely viewed as a move designed to encourage Aramco to list in London.

The plan to sell 5% of the oil giant’s stock was originally expected in 2018, but a sluggish oil market recovery and fierce debate over how much to raise, and where, has stalled the plan.

The IPO was dealt another blow in October last year following international outcry over the murder of Saudi journalist Jamal Khashoggi inside the Saudi consulate in Istanbul.

The Saudi energy minister, Khalid al-Falih, reignited plans for the float earlier this summer after announcing that officials were working to list the company within the next two years.

Aramco announced earlier this month, in its first investor call, that it is ready for the listing whenever its shareholders agreed market conditions were “optimal”.

The company reported profits of $46.9bn for the first half of this year, down from $53.2bn in the first half of last year owing to lower oil prices. The earnings were still well ahead of the world’s six biggest listed oil companies combined.

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The once secretive oil behemoth opened its books to international investors for the first time last year ahead of a record-breaking sovereign bond market debut. The debt issuance raised $12bn following overwhelming interest from major international investors.

The company is taking steps to increase its transparency as part of the Saudi government’s push to open the country to international investment, and diversify its economy beyond its enormous oil reserves.

Aramco produced 13.2m barrels of oil a day in the first half of the year, more than four times the rate of production from rivals such as ExxonMobil, which produced 3.9m a day over the same period.