Al-Falih: Aramco IPO could still happen in 2018

Saudi Arabia may still move forward with an initial public offering (IPO) for state oil company Saudi Aramco on an international exchange such as London or New York in the second half of 2018, despite previously raising doubts it could be delayed to next year, Minister of Energy, Industry and Mineral Resources Khalid Al-Falih said on Thursday.

Falih told Reuters in an interview in Washington the oil giant could be floated either domestically or internationally late this year. New York is still in the running for the IPO but Saudi officials still need to weigh the risk of potential “frivolous lawsuits” in its final decision.

“We have prepared all documentation to be ready to do both domestic and international listings,” Falih said. “We have not closed the door on 2018.”

Saudi Arabia is planning to list up to 5 percent of Saudi Aramco in an initial public offering that could value it at up to $2 trillion and make it the world’s biggest oil company by market capitalization.

Falih said officials have prepared documentation to be ready to do both a domestic and an international listing.

Despite comments he made earlier this month that Aramco was too important to risk listing in the United States because of litigation concerns, such as existing lawsuits against rival oil companies for their role in climate change, he said New York is still in the running for the IPO.

“We have concerns obviously Aramco is too big and too valuable and too important and we could be potentially at risk from some frivolous lawsuits and litigation that we have to consider in our final decision,” he said.

Falish also said that OPEC members will need to continue coordinating with Russia and other non-OPEC oil-producing countries on supply curbs in 2019 to reduce global oil inventories to desired levels.

OPEC and non-OPEC countries struck a production supply agreement in January 2017 to remove 1.8 million barrels per day from global markets and end a supply glut. The cuts helped lift oil prices to current levels of around $65 per barrel. The oil producers will convene in June in Vienna to discuss further cooperation.

"We know for sure that we still have some time to go before we bring inventories down to the level we consider normal and we will identify that by mid-year when we meet in Vienna," Falih said.

"And then we will hopefully by year-end identify the mechanism by which we will work in 2019."

It was unclear what oil supplies would need to be in 2019, he said. Falih has previously said that OPEC would do better to leave the oil market slightly short of supplies rather than ending too early the output cut deal.

Falih said on Thursday there is a general acceptance among producers that further coordination "does not necessarily mean maintaining the same level of cuts.

"It just means that the mechanism has worked and they have committed to work within that mechanism for a much longer period," he said. A new framework "requires agility" and "a willingness to do things differently in terms of what levels of production as the market dictates."

Despite continued rapid growth in output from the United States, Falih said he did not consider the shale industry to be a threat. "The market can take certain level of growth in the US," he said.

"I don’t think it's right to extrapolate the level of growth from the last year and assume that is going to continue," he said, adding that shale production faces several hurdles, including infrastructure and material limitations, pipeline availability and a lack of refining capacity for lighter oil grades.

But without shale supplies, he said, global supplies would have been tight.