Saudi Aramco looks to Gulf partners following muted international interest in IPO

State-backed oil firm’s initial ambitions now much reduced

Funds from the UAE are expected to invest around $1.5bn (£1.2bn, €1.4bn) in Aramco, with the leadership at both the economic and political level keen to support a close regional ally.

Earlier this month, Aramco made its first pitch to officials in Abu Dhabi, hoping to persuade the oil-rich capital of the UAE to become a lead investor in the flotation. Representatives from the Emirate’s sovereign wealth funds and government-related entities are said to have been present.

Saudi officials also hope to raise a further $1bn from Kuwait, another small but oil-rich ally.

The IPO of Aramco, the world’s most profitable company, is the jewel in the crown of Crown Prince Mohammed Bin Salman’s Saudi Vision 2030 plan. This scheme seeks to modernise the Kingdom’s infrastructure and pursue economic diversification, reducing its dependence on oil revenues.

Plans for the IPO have been revised down in recent years. The murder of Jamal Khassoghi, allegedly on Mohammed Bin Salman’s orders and the ongoing war in Yemen have tarnished Saudi Arabia’s supposedly modernising prince in Western eyes.

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Whereas it had once hoped to raise $100bn from a five per cent sale on an international stock exchange, Aramco is now looking to raise $25bn from a 1.5 per cent sale. One third of these available shares will be sold to local retail shareholders, while the remaining two thirds will be mostly taken by Saudi institutions and fund based in allied Gulf nations.

Russian and China have also been approached, while international investor roadshows planned for the U.S. and Europe have been cancelled, with meetings restricted to a number of cities Gulf states.

FURTHER READING: Saudi Aramco float shuns global banks for local investors

FURTHER READING: Saudi Aramco's IPO raises $19.47bn in five days

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