Saudi state oil firm scraps plans to market shares to investors outside Middle East

Saudi Arabia’s state-owned oil corporation has scaled back preparations for its public listing by scrapping plans to market shares in the company to investors outside the Middle East.

Saudi Aramco has reportedly ruled out a formal investor roadshow across Asia, the US and Europe just weeks ahead of a planned initial public offering on Riyadh’s Tadawul stock exchange.

Aramco’s executives were expected to meet with major institutional investors across the world’s financial centres over the coming weeks to promote the world’s most profitable company in the run-up to its listing early next month.

The decision to focus on investors in Saudi Arabia and the Gulf is the latest blow to Aramco’s long-awaited market debut, which was once expected to be the largest in history.

Aramco hoped to raise more than $30bn (£23bn) for the government by selling a stake in its vast oil wealth to help modernise the Saudi economy and gain a foothold in the international investment community.

The early plans prompted a fevered interest among many international banks and stock exchanges eager to lay claim to a piece of the company.

The once secretive oil producer revealed profits of $46.9bn for the first six months of this year, down from $53.2bn in the same period last year but still well ahead of the world’s six biggest listed oil companies combined.

Aramco said it produced an average of 13.2m barrels of oil a day in the first half of the year, more than four times the rate of production of rivals such as ExxonMobil, and at the lowest cost in the world.

Despite Aramco’s eye-watering profits, interest from global investors has cooled in recent months because of concerns over the company’s ties to the Saudi state and its position at the centre of flaring conflicts in the Gulf region.

Major international investors have expressed scepticism over the $2tn valuation set by Crown Prince Mohammed bin Salman, instead estimating its value at between $1.2tn and $1.5tn, according to a poll by Bloomberg.

International banks have also come under fire from green groups for undermining global efforts to tackle the climate crisis by supporting the listing of the world’s biggest oil producer.

In a letter to bank chief executives, including the bosses of HSBC and Goldman Sachs, 10 environmental groups warned that the listing would lead to “the biggest single infusion of capital into the fossil fuel industry” in the period since the Paris climate agreement in 2015.

A Guardian investigation revealed this year that Aramco was the world’s most polluting company because its oil output had produced about 4.4% of the world’s total carbon dioxide and methane emissions since 1965. The company is also expected to lead the growth in fossil fuel production between 2018 and 2030, the period in which experts have warned that climate action is crucial to prevent runaway global heating.

The letter also raised concern over the banks’ eagerness to help raise billions of dollars for Saudi Arabia, “given the horrendous human rights record of the Saudi regime”.

The latest IPO plans, released on Sunday, confirmed that it would sell up to 1.5% of the company at between 30 and 32 riyal a share, which would value it at between $1.6tn and $1.7tn.

At this price the IPO would raise raise $24bn-$25.6bn to help reform the Saudi economy, on a par with the record $25bn raised by the Chinese online retailer Alibaba in 2014.

Aramco has reserved about 0.5% for Saudi retail investors, who have been promised tax cuts and a $75bn-a-year minimum dividend to sweeten the offer. Two-thirds of the shares are expected to be snapped up by institutional investors in the Middle East, with some support from investors in China and Russia.

The exact price of Aramco’s shares will be announced by the company on 4 December, and will begin trading on the Tadawul market a week later.