Saudi Aramco, the world’s largest oil producer, has put on hold its plans to list its energy-trading business on the Riyadh stock exchange, sources familiar with the matter said.
The initial public offering (IPO) of the trading unit, which could have been one of the biggest share sales of 2023, has been delayed due to unfavorable market conditions and the need for more time to integrate its domestic and international operations, the sources said.
Aramco had been aiming to list the business in late 2022 or early this year and was considering seeking a valuation of more than $30 billion, Bloomberg News reported previously. The trading unit handles about 6 million barrels per day of crude oil and refined products for Aramco and its affiliates.
The IPO was part of Aramco’s strategy to diversify its revenue streams and attract more foreign investors to its core business. Aramco raised a record $25.6 billion by selling 1.5% of its shares in 2019, valuing the company at roughly $ 1.7 trillion.
However, the listing plans faced challenges from the start, as some traders within the company were reluctant to disclose their activities and strategies to public scrutiny, people and strategies to public scrutiny, people with knowledge of the matter said. The trading unit also had to deal with volatile energy prices and geopolitical tensions that affected its profitability and risk management.
Aramco also wanted to take more time to complete the integration of its main trading unit with the trading arm of its US refining business Motiva Enterprises before proceeding with the IPO, the sources said. Motiva is the largest US refiner by capacity and operates a network of terminals and pipelines in North America.
Aramco has been working with banks including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley as its studies the potential IPO, people with knowledge of the matter have said. A representative for Aramco declined to comment.
The postponement of IPO comes as Saudi Arabia, typically one of the Gulf’s most active listing markets, has seen a slowdown in IPO activity this year amid concerns over global economic growth and inflation. Just $72 million has been raised from listings in Riyadh, the last since 2014, data compiled by Bloomberg show.
Aramco is not alone in facing challenges in listing its trading business. Very few energy traders are listed, and the major oil firms do not disclose much information about their dealing units. Profits from trading oil, gas and refined fuel can fluctuate significantly depending on market conditions strategies.
Aramco is still pursuing other avenues to raise funds and expand operations. The company is in talks with China Petroleum & Chemical Corp., known as Sinopec, and TotalEnergies SE to invest in a $10 billion gas project in Saudi Arabia. It is also developing a $5 billion green hydrogen project in NEOM, a futuristic city in the northwest of the kingdom, powered by renewable energy.
