Saudi Aramco confirmed Friday it was studying "various options" for the sale of shares, a day after the kingdom's Deputy Crown Prince said an initial public public offering of equity in the state oil giant was being considered.
"Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the company's shares and/or the listing of a bundle its downstream subsidiaries," it said in a statement.
"Once the study of these various options is complete, the findings will be presented to the company's Board of Directors which will make its recommendations to the Saudi Aramco Supreme Council."
On Thursday, Deputy Crown Prince Mohammed Bin Salman said in an interview with the Economist magazine he believed a decision on the sale of equity would be made in the next few months.
"Personally, I am enthusiastic about this step. I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco," he said, without giving further details.
The Aramco statement said the proposal for an IPO was "consistent with the broad and progressive direction pursued by the kingdom for reforms, including privatization in various sectors of the Saudi economy and deregulation of markets".
It also said the process would help the company achieve its aim of becoming the world's leading energy and chemical enterprise.
"This includes prudently managing the kingdom's hydrocarbon resources, adding value across the value chain, reliably meeting its customers' demand, and meeting its stakeholder and environmental commitments," Saudi Aramco said.
UNTHINKABLE
Selling shares in Aramco would have been unthinkable a few months ago.
The kingdom, the world's top oil exporter, has largely kept its oil sector off limits to foreigners.
But much has changed since King Salman took the throne last year after the death of King Abdullah and appointed his 30-year-old son Mohammed as Defense Minister and Deputy Crown Prince.
The young prince is also effectively in charge of the Saudi oil sector, having also been appointed head of a new 10-man council governing Aramco.
He also has subsidy reform in his sights, something he had already flagged in a November interview with the New York Times, which quoted him as saying that only by phasing out subsidies and raising domestic energy prices could Saudi Arabia eventually make nuclear or solar power competitive locally and free up more oil for export.
The IMF, which said in October Saudi Arabia could deplete its financial reserves in less than five years if oil prices remained low, estimates that subsidies cost Saudi Arabia $83 billion -- or 11% of GDP -- in 2014.
In 2015, Riyadh-based Jadwa Investments estimates Saudi Arabia spent around $61 billion on subsidies, or 9.3% of GDP. Some $23 billion went to subsidizing diesel while the gasoline subsidy bill was around $9.5 billion, Jadwa estimates.
The kingdom also burns around 1.6 million b/d of crude oil and products for power generation, with domestic users paying as little as $0.30/KWh, a discount of 60% to international prices, according to Jadwa.
In late December, Saudi Arabia hiked the prices of gasoline, domestic gas for power generation, and ethane feedstock in its 2016 budget as part of a broader program to cut subsidies and reduce its budget deficit.
"We want to reach free energy markets, but with subsidy programs for those with low income, and not to have the subsidy in the form of lowering the energy prices, but through other programs," the prince told the Economist.
The Economist quoted officials saying options under preliminary consideration ranged from listing some of its petrochemical and other downstream businesses to selling shares in the parent company itself.
It also quoted diplomats saying investors were already being sounded out.
Saudi Arabia holds the world's biggest reserves of conventional oil, nearly 267 billion barrels. It claims production capacity of 12.5 million b/d and has been pumping more than 10 million b/d since last March.
According to official data, it produced a record 10.564 million b/d last June.
Even at current low oil prices, a listed Aramco would generate annual revenues of some $90 billion, based on current exports of around 7 billion b/d alone.
In its most recent report, the International Energy Agency estimated Saudi crude output at 10.2 million b/d, was more than 12% of total world supply.
