Oil Price: Can Aramco's IPO Kill OPEC?

The global oil market is expected to enter a turbulent period in the coming weeks. After the shale revolution in the United States, which threatened OPEC cohesion and market stability, a new danger looms.

In a report on Oil Price, Cyril Wiedershoven said Aramco's initial public offering - the largest public offering in history - will not only affect OPEC but also have implications for the kingdom, Crown Prince Mohammed bin Salman and the entire Gulf region.

According to the website, most analysts pointed out that there are some key issues related to the company's financial situation and valuation and potential returns to the Kingdom, while international banks offer their IPO valuations, indicating a wide range of target prices, which leaves much room for speculation.

Threats
According to the author, Aramco's initial public offering announcement points to some threats that appear to have not been included in most analyzes, such as the impact of oil demand growth, possible legal consequences if listed on the Western Stock Exchange, and a potential lack of interest from US and European institutional investors. .

The financial situation is the only thing analysts are reviewing. In addition, legal risks, including the September 11 bill and the position of the US Congress, could pose a major threat to Aramco's future.

On the other hand, the possibility of investing in an oil company may have brought lawsuits against it for so-called terrorism or violence by new third parties, but oil companies have always been targets of legal issues, the report said.

"Recently, we have seen numerous lawsuits and class action lawsuits against companies such as Shell, ENI, Total and BP. When listed, Aramco will become a more regular company than ever before. At the moment, Saudi Arabia faces an immeasurable risk, but Is a clear and present danger. "

Aramco may also face the same scrutiny that other international oil companies are currently facing from global warming and climate change activists, the author says.

"If climate issues are raised in the United States or some European countries, Aramco may find itself in trouble. In addition, billions of dollars of claims should be expected, as activists see the world's largest oil company as a symbol that their cause can rally against," she said. ".

Change attitudes and interests of OPEC
"The success of Aramco's IPO, spurred by Asian and non-Western investment institutions, sovereign wealth funds and even international oil companies, has another non-environmental problem," she says.

"As the main player in OPEC, Aramco will have to work differently in its dealings with the market if it is to be an already listed oil company."

"Acting as a normal oil giant will require a serious change in attitudes, management and goals. Although the company is not directly owned or officially affiliated with the Saudi government, it has always been a tool for the Kingdom's geopolitical and economic strategy."

"Aramco's production and investments have always been clearly linked to the future of Saudi Arabia and the geopolitical stakeholders it represents," she said.

The Oil Price report indicated that Aramco would have to deviate from this strategy, putting the company on a collision course with the OPEC agenda, so shareholders would not be very happy if OPEC members decided to limit the size of Aramco's production.

If Aramco decides not to comply with OPEC, it would make the organization powerless, while Saudi officials strongly deny the threat to OPEC, so potential shareholders and investors should be aware of this major issue before investing in the company.

No war
"Openness may bring with it a range of risks, but there may also be some unintended positive results," she says.

"In the event that the risks are high, some positive points should also be mentioned, as the IPO in Aramco has already contributed to some unexpected positive changes in the GCC."

Thanks to the initial public offering, the war has not yet erupted between Iran, Saudi Arabia and the UAE, and Saudi Arabia's risk in Yemen is entering its final phase.

The author believes that Riyadh and Abu Dhabi have realized that the risk of fighting a war will not only create a bloody conflict, but also mean the end of most of the region's economic and social diversification plans. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have expressed public willingness to solve problems with Qatar.