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11 November 2019

Saudi Aramco IPO prospectus projects oil demand to increase in 20 years

According to one estimate, Saudi Aramco’s reserves could sustain output in the coming decades as the company improves field recovery factors.


Saudi Aramco’s initial public offering (IPO) prospectus contains an assessment that projects global oil demand to peak within the next 20 years, suggesting views are slowly changing in the Kingdom where officials long dismissed the notion as overblown, reported Bloomberg.

The state-owned energy giant used a forecast from industry consultant IHS Markit rather than providing its own assessment—IHS Markit forecasts oil demand to peak around 2035. Under that scenario, demand growth for crude and other oil products will be ‘levelling off’ at that time.

A second scenario in the prospectus assumes a faster transition away from fossil fuels that leads to peak oil demand occurring in the late 2020s.

In February 2019, Saudi Aramco Chief Executive Officer dismissed concerns about the rise of alternatives to oil as ‘not based on logic and facts’, adding that they arose ‘mostly in response to pressure and hype’.

Similarly, Khalid Al-Falih, the Kingdom’s former Energy Minister was equally dismissive, saying in 2017 that talk about peak demand among energy executives, analysts and activists was ‘misguided’.

The forecasts also stretch much further into the future than those Saudi Aramco provided in the prospectus for its April bond sale. Just over six months ago, the company was only giving investors a view of oil markets up until 2030, while now it’s providing a view way to 2050. Back in April 2019, Saudi Aramco gave no indication that a peak in oil demand was on the horizon.

Based on the Kingdom’s reserves, Saudi Aramco will be able to continue pumping as much as 11 million barrels a day of crude and condensate into the 2030s and possibly go as high as 13 million barrels a day in the 2040s.

The oil company published the prospectus as it pushes ahead with what could be the biggest-ever share sale. One thing absent from the document was any suggestion of what valuation Saudi Aramco is aiming for.

Saudi Crown Prince Mohammed bin Salman has said that the company should be valued at $2 trillion, but bankers who have tried to value the company have suggested it may be worth anywhere from $1.1 trillion to $2.5 trillion.






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