Three informed sources revealed to Reuters on Thursday that Saudi Arabia is ready to sell more shares in the energy giant Aramco, which could boost the kingdom's financing and its goal of reducing its economy's dependence on oil. One source mentioned that the government identified Citigroup, Goldman Sachs, and HSBC as banks for the sale, while a second source indicated that the sale could take place during the second or third quarter of this year. Bloomberg, which was the first to report on the planned sale, noted that selling the stake could raise $20 billion. The sources stated that preparations are underway and details may change.
The kingdom anticipates a deficit of around 79 billion riyals ($21.07 billion) in its 2024 budget, or 2.0% of GDP, while analysts expect the deficit to exceed estimates due to rising spending needs. The news of new Aramco shares comes after the Saudi Ministry of Energy instructed the oil company in January to halt plans to increase its maximum sustainable capacity to 13 million barrels per day and revert to the previous target of 12 million barrels per day. Analysts suggested that funds allocated for the capacity increase might be redirected to the public treasury.
The kingdom has already benefited from debt markets with $12 billion raised since the beginning of the year to cover the budget deficit. Aramco paid $10 billion in performance-linked dividends in both of the last two quarters, which were announced earlier in 2023, in addition to royalties linked to Brent crude and about $19.5 billion in core dividends each quarter. Aramco completed the largest initial public offering in the world in late 2019, raising $25.6 billion, before selling more shares to bring the total offer value to $29.4 billion.
Saudi Arabia is the majority shareholder in Aramco and relies heavily on its payments. The government directly owns 90.19% of the company's shares, while the Public Investment Fund owns 4.0%, with the fund's subsidiary Sanabil holding another 4.0%, according to data from the London Stock Exchange Group. Aramco is expected to publish its financial results for 2023 in March, which may include an update on capital expenditures following the decision to halt plans to increase maximum sustainable capacity.
