One thing we have learnt this week – Aramco float

Is an Aramco float on the cards?  According to its website it is.  As we have reported on several times over the last year on this blog the Saudis have a problem.   The oil price fall has hit their economy very hard. In addition they are fighting a messy proxy war with Iran in Yemen which they show no signs of winning.  Finally due to the execution of Saudi cleric Nimr Baqr al-Nimr recently tensions with Iran have burst into the open.

What to do?  They have started cutting public spending and government subsidies hard but show no sign of limiting production of oil for reasons we have outlined before.  An Aramco float could be a way of raising very large amounts of money.  Potentially trillions of dollars.

There is a problem though.  For a number of decades many people don’t think that many OPEC countries have been entirely truthful about their reserves.  Look at these reserve figures in the figure shown below from our book.  In the mid eighties many OPEC countries miraculously “found” vast reserves.

chapter1 figure 3If Saudi Arabia is serious about an Aramco float even of 5%, as is rumoured they are going to be transparent about how much is left.  Its been thought for some years that they maybe have a lot less oil left in the ground than is officially claimed.

Neil

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