| Pub. Date | : October, 2021 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP361021 |
| Author Name | : Alok Kavthankar* and Indu Perepu** |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 17 |
In early 2016, the largest state-owned oil company in the world, Saudi Arabia-based Saudi Aramco (Aramco), declared a proposal to float an IPO. The crown prince of Saudi Arabia, Prince Salman, had stunned the world when he declared in early 2016 that Aramco's worth would be around $2 tn. Aramco was not only an oil company but a budget to run the nation as 85% of Saudi Arabia's budget came from the tax which Aramco had to pay. The intent to monetize the state jewel came at a time when the economy of the Kingdom was under pressure. A widening fiscal deficit and depleting foreign reserves indicated that it was no longer viable to depend on oil exports to run the nation. There was a need to diversify and the impetus to do so would come from the proceeds of the IPO. But the IPO which would decide the fate of 33 million Saudis would come with its own set of challenges. The success of Aramco's IPO would be a function of numerous factors-some in the Kingdom's control and some beyond. In 2017, concerns about climate change were on the rise. Climate policies threatened to put a 40% discount on Prince Salman's $2 tn aspirations. The commitment of global leaders to keep a check on global warming would escalate proliferation of renewables across the world and further build a pessimistic outlook for the future of oil prices. It remained to be seen how an IPO would shape the nation and how an oil giant would shape the future of world climate.
Aramco is not a company; it is the Saudi Arabian budget to run the country.1
- Aswath Damodaran, Professor of Finance at the Stern School of Business, in 2017
In early 2016, it was reported that Saudi Arabian national petroleum and natural gas company Saudi Aramco (Aramco), the world's largest oil exporter with access to the world's second largest proven oil reserves, was seeking proposals to float an IPO.2 Though Aramco was a