The business landscape in the United Arab Emirates is witnessing a significant development as Saudi Arabia’s Crown Prince has authorized the transfer of an additional 8% stake in the national oil behemoth, Saudi Aramco, to the nation’s principal sovereign wealth fund. Valued at approximately $160 billion, this move is part of a broader strategy to diversify the kingdom’s economy beyond oil dependence.
Under the aegis of Crown Prince Mohammed bin Salman, the Public Investment Fund (PIF) is expected to play a crucial role in the ambitious Saudi Vision 2030 plan. Through this initiative, the kingdom aims to develop mega projects and expand its global investments in various sectors, including sports.
The transfer of a portion of the state’s shares in Saudi Aramco is aimed at fostering and diversifying the national economy, enhancing investment prospects in congruence with Saudi Vision 2030, and reinforcing PIF’s robust financial standing and creditworthiness.
Post-transfer, the kingdom’s shareholding in Aramco stands at 82.186%. Aramco, officially known as the Saudi Arabian Oil Co., has acknowledged this internal transaction, which involved no agreements, payments, or proceeds impacting the company.
With a market valuation of $2 trillion, Aramco ranks as the fourth most valuable company globally, trailing behind industry titans Apple, Microsoft, and NVIDIA. On Thursday, shares of Aramco saw a marginal rise on Riyadh’s Tadawul stock exchange, reaching $8.45, while benchmark Brent crude traded above $82 a barrel.
Previously, in February 2022, a 4% stake in Aramco was transferred to the PIF by the Crown Prince. Additionally, last year, another 4% was allocated to the Saudi Arabian Investment Co, known as Sanabil Investments, which operates under the PIF. Since Aramco’s 2019 initial public offering, just 1.73% of its shares are traded on the Tadawul.
Aramco’s profits for 2022 hit a record $161 billion, the highest for any publicly listed company. This surge in earnings came amidst rising energy prices triggered by the conflict in Ukraine and consequent sanctions on Russian oil and gas in Western markets. However, these profits have drawn scrutiny from activists concerned about the impact of fossil fuels on climate change.
Aramco is preparing to announce its earnings for 2023 on March 11. Saudi Arabia’s oil, easily accessible from its desert terrain, is among the most cost-effective to produce globally. The Crown Prince’s vision includes leveraging these oil resources to transition the kingdom’s economy away from oil sales, with initiatives like the proposed $500 billion Neom city and other projects.
The recent share transfer underscores the Crown Prince’s commitment to the PIF’s mandate of launching new sectors, forging strategic partnerships, localizing technology, disseminating knowledge, and generating employment opportunities within the local market.