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Saudi Oil Minister Falih cautious on $2-trillion Aramco IPO, downplays timing

Vienna — Saudi energy minister Khalid al-Falih said Thursday he hopes the publiclisting of state oil company Aramco happens in 2019, but warned many factorsremain unresolved before a final decision is made on the potential $2 trillionIPO.

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Achieving higher and sustainable oil prices is essential to guaranteeingthe best valuation of the state-run oil giant, the world's single largestproducer of crude. The initial public offering of up to a 5% stake is acornerstone of Crown Prince Mohammed bin Salman's strategy to reform thekingdom's economy.

"It would be nice to do it in 2019," Falih said at the OPEC Seminar inVienna. "The timing is not critical to the government of Saudi Arabia. It doesnot have to happen at a certain date."

Aramco produces crude in the kingdom on behalf of the government andreturns revenues in the form of royalties and taxation on its income. LastMarch, Riyadh reduced the tax threshold set for Aramco, lowering its incometax rate to 50% from 85% to help make it more attractive to potentialinvestors.

The company's concession to produce crude in the kingdom dates back to1933 and it forms an integral part of the Saudi economy. Aramco's oil and gasprovides around 85% of government revenues. Despite OPEC cuts, Saudi Arabiaremains the world's biggest exporter of crude, with the capacity to pumparound 12 million b/d if required.

New York and London are among the global exchanges vying to host theinternational portion of the listing. However, listing rules in the US couldact as a barrier to the world's largest capital market. In the UK, theauthorities have changed their listing rules in an effort to lure the listing,which the crown prince hopes will provide the kingdom with a $100-billionwindfall to pay for reforms.

Falih said "legal considerations" would remain a significant issue in thedecision, but that "various venues are open to us."

The schedule for the IPO has slipped from this year. Before the proposedlisting, financial information about the company was opaque including thekingdom's reserves, which exceed 260 billion barrels of crude.

"At the end of the day, there is a lot more at stake than just ticking abox and saying we get this out of the way," Falih said. "We are weighing avery deliberate decision."

--Staff, newsdesk@spglobal.com

--Edited by Jonathan Dart, newsdesk@spglobal.com