The weekend attacks on key oil infrastructure in Saudi Arabia have
investors anxious as the Kingdom has just accelerated plans to list Saudi
Aramco in what would be the world’s largest initial public offering (IPO)
ever.
Despite the world-class assets and the fact that Saudi Aramco pumped just
below 10 million bpd before the attacks—or more than the world’s top four
listed oil companies combined—financial analysts and investors tell Bloomberg
that the valuation of the company may not fully account for major supply
disruptions like the current one.
“They are the best assets in the world but I have no interest in owning
Aramco given the security risks,” Ben Cleary, Asia chief executive officer at
Tribeca Investment Partners Pty, told Bloomberg, noting that the geopolitical
risks in the Persian Gulf and risks of more attacks on critical Saudi oil
infrastructure wouldn’t go away anytime soon.
On Saturday, the Abqaiq facility and the Khurais oil field in Saudi Arabia
were hit
by attacks, which resulted in the suspension of more than half of Saudi
Arabia’s oil production.
Terrorist attacks with projectiles resulted in production suspension of
5.7 million barrels of crude oil per day, Saudi Aramco said
on Saturday, confirming the loss of more than half of the Kingdom’s oil
production.
Oil prices shot
up on Monday after markets reopened following the attacks, while analysts
say that the price movement in the next few days will be determined by how
fast and how much of the oil production Aramco can restore.
According to analysts, the longer the timeline for Aramco to restore crude
oil production, the more bullish this will be for the price of oil.
Ironically, Saudi Arabia needs around $80 a barrel Brent Crude to rebalance
its budget and a fairly high oil price to get as high a valuation for Aramco
in the IPO as it can.
By Tsvetana Paraskova for Oilprice.com
