The Oil Mystery Undermining An Aramco IPO

Lambert here: Hard to imagine buying an enormous store selling hard goods without taking a physical inventory, it is true. Over-simplified?

By Kurt Cobb, a freelance writer and communications consultant who writes frequently about energy and environment. His work has also appeared in The Christian Science Monitor, Resilience, Le Monde Diplomatique, TalkMarkets,, Business Insider and many other places. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. Originally published at

It’s what you can’t see—the oil beneath the Arabian sands—that potential investors in Saudi Aramco’s on-again, off-again initial public offering (IPO) ought to focus on. The truth about the remaining oil resources beneath the Saudi desert continues to be a state secret. I’ll elaborate on this after a little background to set the context.

Recently, Saudi Aramco, the state-owned Saudi oil company, delayed its planned IPO again. For those who missed the previous time, plans for the IPO first came to light in 2016 as part of Saudi Arabia’s 2030 Vision, essentially a plan to diversify the country’s economy away from heavy dependence on oil. The feverish attention the proposed IPO produced abated when the world’s largest company unexpectedly withdrew it in 2018. The financial firms advising the government were let go as the government looked for other ways to raise money for its 2030 Vision plans.

And yet, the IPO idea remained a possibility and was later revived. The problem has been that both times the IPO looked like it was about to happen, the Kingdom of Saudi Arabia got cold feet, worried that it might not get the $100 billion it wants for 5 percent of the company.

Initial hopes of listings on prominent international exchanges such as the New York Stock Exchange and the London Stock Exchange have long since been abandoned. But the most recent IPO attempt was to be made wholly on Saudi Arabia’s own domestic exchange. Even that apparently looked like it might fail.

So, the big question is why. The answer is probably right beneath the Saudis’ feet: The oil under Saudi sands—or rather the uncertainty about the amount of extractable oil that still lies there.

The vast infrastructure that makes up the Saudi oil industry is visible to anyone with access to satellite photography. Its details are so widely known that the kingdom’s enemies in Yemen were able to launch a crippling drone strike on that infrastructure not long ago that temporarily knocked out half the kingdom’s production capacity.

None of this is a mystery to investors. And, the amount of oil that is brought out of the ground and sold each day into the international and domestic markets is calculated and crosschecked against information from a vast international oil surveillance system where precious data about oil well production and cargoes goes for millions of dollars to subscribers.

The one piece of data that cannot be known with much clarity is the size of Saudi oil reserves. The Saudis have a publicly stated number. But Saudi Aramco has not submitted to an independent audit of its reserves since 1980. Stated reserves have barely budged since 1998 according to the most recent BP Statistical Review of World Energy despite enormous production. One would think that 20 years of robust production would have had some downward effect on reserve numbers.

But even if reserves have in reality held steady, what’s left of the total oil resources under Saudi Arabia has been declining. (Resources are typically defined as original oil in place, a rather vague estimate. Reserves are defined as oil which can be extracted profitably at today’s prices using current technology from proven deposits. Reserves are only a tiny fraction of resources though reserves may be expanded through exploration and sufficient drilling.)

Why might investors be skittish about Aramco’s oil reserve claims? Back in 2011 diplomatic cables leaked by Wikileaks revealed that the company might not have the reserves it is claiming, though the diplomats misstated how much lower those reserves might be. But perhaps the biggest reason for the skittishness is that the company seems unwilling to make full disclosure about its reserves. That is almost certainly one of the reasons why the IPO will not be appearing on the New York Stock Exchange which has standards of disclosure that would require an independent audit of reserves.

None of us who have been watching the melodrama of the Saudi Aramco IPO will be surprised if the IPO gets rescheduled and then canceled once again. To put it plainly, investors don’t seem to trust Saudi Aramco’s representations about its reserves and so must be discounting the publicly available numbers. That is what is likely spooking the Saudi government which keeps hoping against hope to get the $100 billion it wants from the IPO.

Therefore, I don’t recommend holding your breath waiting for the kingdom to submit to an independent audit of oil reserves that will clear up the matter anytime soon.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. The Rev Kev

    What I like most about a Saudi IPO is that if international investors have any problems afterwards, all they have to do is go to the Saudi legal system for a fair judgement. The same one that sentences people caught by their special “Anti-Witchcraft Unit” to death for witchcraft and magical crime.

    1. fajensen

      Hehe: There will be a lot of one-handed and one-legged bankers coming out of that venture, we should be Long Prosthetics if it ever goes ahead.

      Maybe they are on to something: Economics as currently practiced within the established part of the profession *is* pretty much witchcraft, except using actual witchcraft would give better predictions than economics does!

  2. Watt4Bob

    When it comes to oil, who tells the truth?

    I’ve speculated before that the long-term strategy, of the Anglo-American oil interests, in the broadest sense, was and is, to consume/sell the ME oil for as long as possible, leaving domestic oil in reserve.

    The history of oil has been one of pillage, partially obscured by a’market‘, but undergirded by a militaristic empire that rules the seas with a navy that in 1908, decided it would run on oil rather than coal.

    It’s in the interest of the MIC to obfuscate every feature of the oil ‘market’, so why would anyone believe anything ‘they’ say?

    Investors have probably signaled that they are afraid that SA is trying to cash in, too late, on a resource that may no longer exist.

    “Never buy a pig in a poke.”

    1. David Mills

      You beat me to the “pig in a poke” quip… :-(

      Indeterminable reserves, Sovereign majority shareholder, listing/voting structure most likely a dog’s breakfast… Minorities will be hosed by this deal (probably a feature, not a bug).

      How to value it? discounted cash flow, dividend discount models, reserve basis; not to mention tax rates, production royalties…

      Didn’t someone really clever mention something about the glorification of plunder.


      NB: Norway’s sovereign wealth fund just broke the Trillion $ mark.

      1. Watt4Bob

        I posted this at Firedoglake in 2010 it’s about the Deepwater Horizon, but relates to our current conversation.

        This wasn’t just another oil well.

        Here’s and excerpt;

        The oil industry has knowledge of the deposit more than they admit. The deposit is 100 miles off shore. They are drilling into the edge of the deposit to leak it down gently to be able to produce from the deposit. The deposit is so large that while I have never heard exact numbers it was described to me to be either the largest or the second largest oil deposit ever found. It is mostly a natural gas deposit. That is another reason not to blast too willy nilly there. The natural gas that could be released is really way beyond the oil in quantity. It is like 10,000 times the oil in the deposit.

        It is this deposit that has me reminding people of what the Shell geologist told me about the deposit. This was the quote, “Energy shortage…, Hell! We are afraid of running out of air to burn.” The deposit is very large. It covers an area off shore something like 25,000 square miles. Natural Gas and Oil is leaking out of the deposit as far inland as Central Alabama and way over into Florida and even over to Louisiana almost as far as Texas. This is a really massive deposit. Punching holes in the deposit is a really scary event as we are now seeing. … “

        What they’re describing is BP punching the first hole in what could be the biggest oil prospect in the world, one which they’ve known about for a long time, (the article says at least since 1988), but have never mentioned to the American public.

        1. Jeremy Grimm

          Your comment is non sequitur to this post — but be that as it may —
          It is not necessary to contest your assertions about the deposit in the Gulf not being “just another oil well” — although I am less than completely trusting of the reports of an unnamed Shell geologist’s fears of running out of air to burn all that oil [unless he is making a back-handed reference to a major die-off of plant life]. There are probably other deposits in the oceans, in the Arctic, and in Antarctica. Getting the oil out is not as cheap and easy as getting it out of the wells in Pennsylvania, then in Texas, then in Saudi Arabia and so on. Assuming the technology exists or will exist — the costs for extraction make these other sources profitable only if the price of oil increases to a certain point. You run up against Gail Tverberg’s arguments and unless you come up with a theory of oil production to suggesting it is and will continue to be produced in the Earth by some as yet mysterious process — the amount of oil remains finite. A giant deposit in the Gulf does not negate the arguments of the Peak Oil predictions. The easy to extract oil appears to have peaked around 2007. A giant deposit in the Gulf, and other similar deposits would seem like stage-III production after the fracking craze fizzles.

          There may be some dark actions behind the scenes by Big Oil to prick the Saudi IPO — but why? If the Saudis have plenty of oil in the ground to back the value of their IPO, that oil remains less costly to extract than the Gulf of Mexico Oil you are speculating about — with or without a successful ARAMCO IPO.

          1. drumlin woodchuckles

            All the oxygen in the air came from plants and algae and etc. ramming water and CO2 molecules together and expelling excess oxygens into the air. Just as all the bio-carbon under the ground ( coal, gas, oil ,etc.) is fossil carbon, all the oxygen in the air is fossil oxygen . . . the buildup of oxygen from 5 hundred million years of plant life.

            1. Jeremy Grimm

              The oxygen in the air came from and comes from plants. I don’t know what proportion of oxygen is a legacy build-up from “5 hundred million years of plant life” and what proportion is the excess oxygen the existing plant life adds to the atmosphere to offset various oxidation processes including fire of various sorts. My impression is that plants are pretty good at keeping oxygen in our air. So I tend to believe that the Shell oil man’s comment about burning up all the “air to burn” might be hyperbole. Are you suggesting that as we add ppm CO2 to the atmosphere as we breathe and burn fossil fuels we are removing sufficient O2 to make a dent in the oxygen levels in our atmosphere? If so, that should ring a few alarm bells about exploiting the oil deposit in the Gulf of Mexico as well as our continued burning of fossil fuels — but if I were you I would hesitate a moment before making such a claim.

          2. Watt4Bob

            My comment is directly related to this post in that it explains the system under which the SA resources have been exploited over the post war period, about 70 years, and this history has an important affect on the perceived value of the IPO.

            (And if you start counting at the birth of the Anglo-Persian oil company in 1908, the history of ME oil exploitation by the Anglo-American empire, that pushes it back over one hundred years.)

            What I’m pointing out is the fact that after 70 years or so of the Anglo-American empire’s exploitation in SA’s case, how are investors to assess the value of the remaining Saudi ‘reserves’, considering the empire never lets go of anything it controls unless it is no longer valuable?

            It should be clear to anyone who follows this history, that the UK and the USA were determined early on to dominate the Middle East’s oil and never let go, we’re still invading oil producing countries to this day, so why would are standing by as SA offers to sell shares, unless ‘we‘ have determined it
            doesn’t matter.

            The reason it doesn’t matter is that production has always been controlled on a sort of schedule, at first by western oil companies, and later by OPEC, and it seems that the schedule was meant to allow for the draining of oil resources in a sequence convenient to Big Oil.

            My take is that SA went along with this plan, at first because they were first in line so to speak, and the House of Saud were co-opted by the immense riches that came with partnering with the empire.

            They later became the de facto leadership of OPEC and have been satisfied with having the clout to influence/set oil prices, this has been the way things are since 1960, with the empire still dominating, but the oil producers having a bit of leverage.

            There may be some dark actions behind the scenes by Big Oil to prick the Saudi IPO — but why?

            I am not suggesting Big Oil is taking ‘dark actions’ behind the scenes to pric the Saudi IPO, I’m saying Big Oil has never behaved in any other manner than to treat ME oil as their property, and all other sources of oil in the world as their ‘reserves’, that includes all oil remaining under the Gulf of Mexico, thus my mentioning the oil men’s opinions about the size of those plays that came to my attention because the of the various controversies surrounding the Deepwater Horizon catastrophe.

            You are right, in that Big Oil has been getting the easy oil first, it just happens that the easy oil has so far been largely in other countries, however, it remains to be seen, how large the more difficult to reach deposits are, and the guys whose opinions I linked to say they are very, very large.

            Why is it so hard to imagine that Big Oil has always played it’s cards so close to its chest?

            Why is it so hard to imagine that Big Oil’s plan is, and has been obvious from the start, use up everyone else’s oil first, then tap your own ‘reserves’.

            And never admit exactly how big those reserves are.

            1. Jeremy Grimm

              I have never thought otherwise than that “Big Oil has never behaved in any other manner than to treat ME oil as their property, and all other sources of oil in the world as their ‘reserves’”, much as they treat the US Military as their enforcers. That is what I intended by my reference to ‘dark actions’ — but I don’t need to suppose any Big Oil influence to explain why the Aramco IPO might have problems. I believe the failures of the IPO indicate a deep mistrust of the Saudi government — along many lines.

              I am skeptical of the imputed size of the reserves the oilmen want to ‘develop’ — particularly as imputed by the oilmen, and Shell Oil has earned its own share of deep mistrust. Hugh reserves of very expensive to extract oil — assuming they could be extracted, and even assuming a deposit of the size the oilmen promote — seem at best problematic in explaining the failures of the Aramco IPO or explaining the motives and actions of Big Oil. Hence my suggestion the content of your initial comment was non sequitur to the topic of the post and the comment above it in this thread.

              What inclined me to point this out initially was the way you seemed to be twisting the concept of Peak Oil.

    2. Susan the Other

      Wondering what this will do for Exxon’s defense in NY and MA law suits against the company for “fraud”. The fraud they are specifying in MA is investor misinformation – Exxon claimed no problemo on climate change; the shares of the company were good as gold, while at the same time Exxon prepared for the worst. Now this potential change in their actual access to oil reserves might well change their defense if it turns out that oil is a rapidly diminishing resource, or in the case of SA, gone. The oil reserves of SA were clearly a closely held secret, but Exxon’s no fool. They would have known and kept it secret as well. Also makes me wonder about the recent mad dash of Russia, the US, etc. to strike more oil. Not to mention the totally blatant theft of Syrian oil fields most recently. And the SNAFU in Venezuela; the almost hot war in the South China Sea. And our steadfast refusal to actually get out of the ME… it’s gotta be the lure of the Caspian.

      1. Amfortas the hippie

        another on the scale on the side of Peak: if there’s all kinds of easy oil left, why spend so much money and time and energy trying to get the hard stuff? like deepwater…or the fracking mess?
        the latter is literally scraping the bottom of the barrel. the permian and south texas peaked when i was like 3 years old.
        my family’s business was peripheral to the oil business in houston…and dad had a fishing buddy who was a “lateral drilling expert”. we were on the boat in the bay with him one time, and he had a few too many tecates, and was going on and on about Kuwait(this is maybe ’84), where he’d just got back from. SA before that.
        he said they were “bottle brushing” the big fields there…which meant that they were tapped…and that one wouldn’t do that to a productive field, because it screws up the strata and essentially destroys the field.
        he made all kinds of bank, because he was apparently one of 20 guys in the world who knew how to do that at the time.
        (which is maybe why this stuck in my memory for so long,lol…he was as hick as you can get)
        so yeah…peak has been known about for a long time in some circles.
        and, as near as i can tell, the purpose of iraqwar 1 & 2 was to sequester the last big pool of light sweet safely under the sand, until it’s needed for the legions. the door to that vault consists of chaos and depleted uranium.

        in related anecdotal news on the ground: both my brother in laws have been working the permian for a few years(“The New Saudi Arabia!!”)…one in sand, the other on the rigs. Both have gotten wind that a downturn is coming, and are actively looking for jobs elsewhere.
        I’m hearing the same from quite a few others who live here and work out there. some are speculating that the action is moving back to south texas, but i haven’t even attempted to confirm this.
        since the companies in question have never shown a profit, and have been burning through pensions and other capital pools willy nilly, what effect will the bust have on the rest of the spinning plate economy?

  3. Robert Tracsk

    If you are an investment banker, as am I. The key to an IPO is to do your due diligence. Which means to look closely at all the factors in the business of a potential IPO. The KEY factor, in this case, is very clear and simple – How big are the Saudi reserves. The last time they were INDEPENDENTLY (the ONLY acceptable audit) audited was 1980 – OK STOP. That is the end of ALL forward movement – that is totally
    absurd and no rational banker would touch this without a recent audit ( a YEAR OR TWO) CERTAINLY
    NOT 40 YEARS. From all the obvious evidence and the obvious lack of data – this is a scam until reserves can be proven.

    1. a different chris

      Once upon a time “no rational banker” would have been true.

      But: Bankers use other people’s money. I bet you could think of a colleague or two that, for 50million US dollars or so in a Swiss bank account, who would be more than happy to sign off on this. Would that not be “rational”? He/she gets fired eventually, but it’s not like they will need to ever work again.

      1. fajensen

        He/she gets fired eventually, but it’s not like they will need to ever work again.

        Not *just* fired. Their out-boarding ‘interview’ will be something along the lines of getting a privately guided trip to the sewers via a portable tissue digester (They will never have to work again though, so there is that)!

        The ‘talent pool’ knows very well that this thing is serious big-money action and knowing too much about any of the details will almost certainly get one killed before one can burn trough the money – *unless* one can rat ‘them’ out first and pull witness protection, in which case ‘they’ will have to preempt that happening by killing one sooner than anyone anticipated. So no good options, really.

        *That* is the main obstacle faced by ‘Procurement’.

  4. Tobin Paz

    Peak oil and resource depletion is not a difficult concept:

    WikiLeaks peak oil bombshell: Saudi Arabian reserves overstated by 40%, global production plateau immiment

    First off, the guy who was in charge of exploration at Sauid Aramco says they have oversold their sustainable peak capacity. Second, while he said he doesn’t believe in peak oil, and he lays out a peak oil scenario. Third, he believes it wasn’t speculators but market realities that drove up prices.

    As a “scientist” I have always been baffled by the inability of economists to recognize that you can’t have infinite growth on a finite planet.

    1. Robert Valiant

      As a “scientist” I have always been baffled by the inability of economists to recognize that you can’t have infinite growth on a finite planet.

      Bacteria in a Petri plate – I agree.

      One of my favorite scientists, Buckminster Fuller, had a different idea; he called it ephemeralization.

      As much as I admire him, I think he was wrong, but this notion has become quite prevalent.

      1. Mel

        Ephemeralization can work and is working, though I don’t like it, and maybe you don’t either. For example, the emergence of the FIRE sector, where money is made by simply making money, and not getting mixed up with messy physical processes. Also the attention given to Intellectual Property. “Everything solid melts into air”, as the guy said.

    2. marku52

      Economist sits next to a physicist at a dinner party. Hilarity ensues….

      “The upshot is that at a 2.3% growth rate (conveniently chosen to represent a 10× increase every century), we would reach boiling temperature in about 400 years. [Pained expression from economist.] ”

      “If the flow of energy is fixed, but we posit continued economic growth, then GDP continues to grow while energy remains at a fixed scale. This means that energy—a physically-constrained resource, mind—must become arbitrarily cheap as GDP continues to grow and leave energy in the dust.

      Economist: Yes, I think energy plays a diminishing role in the economy and becomes too cheap to worry about.

      Physicist: Wow. Do you really believe that? A physically limited resource (read scarcity) that is fundamental to every economic activity becomes arbitrarily cheap? [turns attention to food on the plate, somewhat stunned]”

      The rest of it is great as well….

      1. Foy

        Excellent, thanks for posting! I remember reading this a number of years ago, it hasn’t lost anything, I guess math can’t lose anything! One day the economists may understand thermodynamics…

      2. Jeremy Grimm

        Thank you for the link! The comments to this piece go on for forever, and some of them are quite interesting. I was surprised to find many commenters coming in on the side of the economist — at least near the start of the very lengthy chain of comments.

    3. Ian ollmann

      Peak oil is not what it was in the 70s. These days the question is whether renewables will replace oil demand such that the “problem” is peak demand.

      We very much want and need this problem if we want to curtail carbon emissions, so in the happy future where global warming is arrested, this is what must happen. Combine that with the strong inelasticity of oil prices and we are looking at a future in which there is a lot less money in oil than there is today. Now is an excellent time to sell oil interests to a clueless public and diversify to other things.

      This doesn’t have to be about depleted reserves.

      1. Tobin Paz

        “Renewables”, aside from being built using fossil fuels, also require resources such as lithium, nickel, and cobalt. These resources are also finite:

        Mining and Electric Vehicles: Lithium, Nickel, Cobalt

        Among the many unanswered questions about electric vehicles (EVs) is whether we have enough of the necessary minerals — lithium, cobalt, nickel — to manufacture their batteries.

    4. RBHoughton

      Thank you Tobin for that link to Wikileaks revelation that Saudi reserves were 40% overstated in 2011. And thank you Susan the Other for the reminder about the immense Caspian supply in the Stans. That would appear to be unavailable to the West while Afghan instability continues. The best laid plans, eh!

    5. Tony Wright

      This is the nitty gritty of our existential problem, that politicians listen to the “sweet talk” of economists rather than the “bitter truth” provided by scientists.
      Hence the “fairytale of endless economic growth” so eloquently berated by Greta Thunberg recently.
      And to add a new dimension to the fairytale, we now have $17trillion in debt with negative interest rates.
      Mind you, given that all fiat currency is an increasingly brittle human concoction, it pales into insignificance when compared to the ever increasing species extinctions that we “superior beings” have inflicted on our planet whilst pursuing our ongoing overpopulation and associated economic fairytale.

  5. Susan the Other

    And what did Kashoggi and the Muslim Brotherhood know about this situation? A state secret at peril of being exposed? And in whose interest was he murdered, besides SA? The only way Aramco will sell shares will be through a credible assessment of their reserves. If that isn’t forthcoming we are all justified in assuming Aramco isn’t worth anything. That $200 billion? I wonder if it is just enough to cover Saudi expenses for folding up their tent and moving to an island in Indonesia.

    1. Tony Wright

      Khashoggi. Now there is a word to make anyone with even half a brain want to steer well clear of any investment in Saudi Arabia.
      I have also seen opinions in investment newsletters to the effect that the recent drone strike on Saudi oil facilities is likely to be repeated.

      1. bob

        MbS took every billionaire in the country hostage and released them only after getting paid billions in ransom. Rumor is it cost prince al 6 billion to get out. In the funniest part, I think Bill Gates was the bagman-

        That little bit of a outburst killed any IPO hopes. You don’t take billionaires hostage.

  6. Synoia

    If SA had massive, 100 year oil reserves, would the Saudis be floating Aramco?

    Or are the Saudi’s getting out ahead of the crowd?

    Robert Tracsk above makes the point about due diligence on the Saudi’s oil reserves. The more the Saudis play “yes it is, no it is not” the more the potential investors caution levels (fear of loss) rise.

  7. JimTan

    Aramco’s reserve estimate are definitely suspect, but there is another big issue which has impeded its IPO.

    Listing their shares in U.S. markets would require them to to disclose corrupt payments that are made to ( their own ) government, government owned companies, and government related organizations which could be disguised as royalties, fees, production entitlements, bonuses, charitable donations, or other material benefits. Specifically, section 1504 of the Dodd Frank Act requires all issuers of U.S. securities to disclose any payment made to a department, agency, instrumentality, or company owned by a foreign government in order to further the commercial development of oil, natural gas, or minerals. This requirement means resource companies ( oil, natural gas, minerals ) that list on U.S. exchanges must disclose payments to foreign governments including taxes, royalties, fees, production entitlements, bonuses, and other material benefits. It enhances the Foreign Corrupt Practices Act ( FCPA ) which is limited to prohibiting payments by U.S. listed companies to foreign officials for the purpose of obtaining or retaining business. This is a problem because Aramco has been a huge piggybank for the Saudi royal family since its inception. It is probably the main reason why they are trying to IPO Aramco on the Saudi Arabian Stock Exchange. Unfortunately this makes it very hard for American investors to participate, because American Depository Receipts ( ADRs ) are subject to Dodd Frank and FCPA regulations. One way around this is the U.S. House of Representatives is currently reviewing H.R.4519, a bill that seeks to repeal Section 1504 of the Dodd Frank Act, and shield oil companies from disclosing their payments to foreign governments.

    Ultimately these murky estimates of Aramcos oil reserves, and its extensive global web of corrupt payments probably mean this IPO is not a good investment.

  8. Jeremy Grimm

    While it is true the Saudi’s failures to submit to “an independent audit of its reserves since 1980” and its “stated reserves have barely budged since 1998” should make any rational investor balk at the ARMCO IPO, I remain amazed by how many irrational investors put money into fracking. I believe the failures of the IPO indicate a deep mistrust of the Saudi government.

  9. Tim

    “$100 billion it wants for 5 percent of the company”

    Wait. $2 trillion market cap for stuff we aren’t completely sure will get all get used (climate change), or are even sure exists? Oh, Regime risk too. Who wants a piece of that?

  10. Tom Pfotzer

    Here’s a basic question. “Why would the Saudis sell an interest in their oil?”

    Let’s set out some assumptions, and figure out which of them is/are questionable:

    a. SA has plenty of reserves. Bottomless pit
    b. Demand for oil is level or growing for decades to come
    c. SA will have no geopolitical/security risk to ownership/control of their asset and related income stream. For example, SA’s society can contentedly live on the annual income from their oil sales.

    If A, B and C above are all true, there is no motivation to sell the company, just continue to sell the oil by the tanker-load.

    So, which of those assumptions do you think are not valid?

    I say “A, B and C”.

    Why would anyone buy this thing?

    Wonder what the next move will be when the (latest) Fin Minister has to tell MbS that “I couldn’t make it happen, either”. That’s going to be a big, big problem for MbS.

  11. VietnamVet

    This is peak investment insanity. Saudi Arabia is in the middle of a war zone where one participant, the USA, has stolen Syria’s oil fields. Not to mention, Aramco’s production was cut in half by the September 14th drone attack. Repairs will be completed by the end of November. The Houthis and Shiite militias can and will repeat the attack as long as the Muslim Holy War continues. Periodically oil tankers that are needed to transport the oil to the buyers have been seized or hit by missile attacks. Clearly, this is a sell and run finale of the House of Saud. Who in the world can keep the birthplace of Islam peaceful and prevent the new caliphate from seizing their oil from the infidel investors – Nobody.

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