Page 8 - Expat Living Summer 2016

their infancy and even when matured will only account
Saudi Vision 2030
The Saudi Arabian government have recently released
their agenda for the future of the nation, entitled ‘Saudi the economics of the country and international trade
Vision 2030’, which looks at refurbishing the whole
structure of its economy and most notably reducing its
reliance on revenue from oil.
The declining oil price has threatened the long-term
economic sustainability of the government and has thus
sparked a rethink of future strategy, according to a
report by NES Global Talent.
A major part of this plan is for the state-owned oil
company, Saudi Aramco, to float a maximum of 5 per
cent on the stock market. It would make Saudi Aramco
the most valuable listed company in the world, far
exceeding the likes of Google or Apple. Estimates
indicate it is likely to be worth over $1tn even on a
conservative outlook, which would be worth more than
Apple, ExxonMobil and Facebook put together. The
offering would be the biggest the world has ever seen.
Saudi Aramco was formed in 1933 with the involvement
of Standard Oil of California (itself formed when
Standard Oil was split into 34 different companies).
The Saudi group was part-nationalised in 1933 while its
headquarters moved from New York to Saudi Arabia.
Thirty years later it was fully taken into state hands.
It currently oversees many large oilfields, including
the largest onshore field, Ghawar. A staggering one in
eight barrels of crude oil across the world comes from
underneath the sands of Saudi Arabia. The company
also manages gasfields as well as refining, marketing
and distribution operations, and employs around 60,000
people.
So what implications do Saudi Vision and the flotation of
Saudi Aramco have for both Saudi Arabia and the rest of
the world? Some possible outcomes are:
Reducing the reliance on oil. Although the Saudi
government realise oil is still big business and is going
nowhere soon (other cleaner energy sources are still in
• There is a more detailed guide to Living and Working in Canada
which you can access in the Destination Guides section (under
Expat Resources) of www.expatnetwork.com
08 EXPATLIVING
for a minority of global energy supply), they still realise
they have an ‘addiction to oil’ – the words of Deputy
Crown Prince Mohammed bin Salman, leading the
reforms.
The sovereign investment fund. The sale of Saudi
Aramco will mean Saudi Arabia’s sovereign state fund will
grow even bigger than it already is, and thus become an
even more important player in global investments. This
money will be reinvested in the country and abroad as
well, and thus become an important income generator in
itself. Plus, by offering a slice of the company to overseas
investors it will encourage future foreign investment in
other industries too.
Cultural and political changes. The Saudi Vision 2030
aims to increase private sector ownership from the
current 40% to 65%. This will not only have an effect on
relations, but will also clearly have a spill-over effect on
the culture of the country (as major privatisation often
does). The 5 per cent sale of Saudi Aramco may lead
the way for other state-owned oil companies around
the world to be sold if the IPO is seen as a success. This
would have broad-reaching implications for the whole
Middle East region.
International relations. The prospect of having foreign
ownership over Saudi Aramco (and possibly other
assets in the future) means that other countries could
have a strategic economic interest in keeping the
area politically stable. Increasing the private sector’s
contribution to GDP to 65 per cent also means a
different strategy would be employed towards
international trade.
Transparency and scrutiny. The IPO process will set
Saudi Aramco up for public scrutiny as selling to
global investors involves rigorous accounting and legal
standards, which is most likely to be a good thing. An
IPO by its very nature will also mean Saudi Aramco will
release a lot of previously undisclosed information about
its operations and cash flows; something which has
been previously closely guarded. If other nationalised oil
companies follow the lead, they will also be under the
same global public scrutiny.
Commenting on how the future strategy may affect
professionals in the power and oil & gas sectors, Darren
Grainger, Managing Director of NES Global Talent’s
Middle East division, said: “Saudi Arabia continues to
provide opportunities for qualified industry professionals
across the upstream and downstream sectors. The
2030 vision supports the growth of Saudisation and
diversification within the hydrocarbons sector. The
diversification move down the value chain to Basic
Industries, Intermediates, and Plastics are a key
contributor to the country’s future GDP growth plans.”
There is a more detailed guide to Living and
Working in Saudi Arabia which you can access in the
Destination Guides section (under Expat Resources)
of www.expatnetwork.com