With the drastic fall in the global crude oil price due to the widespread pandemic—a deal as informed by the Crown Prince of Saudi Arabia of offering 1% of stakes of the world leader in oil production, Aramco could take place. The kingdom is planning to rework the economic slump in order to recover from the losses incurred.
Depending on the market value of the company, the deal may cost around $19 billion to a “leading global energy company” which might materialize by 2023. According to Prince’s statement, this deal should be lucrative in the form of higher sales – there is a high expectation of high demand where the potential buyer is located.
For the success of Vision 2030, it is crucial for the country to have solid financial resources to build and diversify the economic status of the country; the crown prince has high hope on Aramco.
The economy of Saudi is majorly dependent on oil and the growth in GDP relates to growth in real oil. Nonetheless, the country has seen a recession with a drop in oil prices and OPEC production shortages in 2020; this, coupled with the pandemic, has crashed the profits of oil giant Aramco. The financial report states a steep cut of profits to almost $49 billion. The price has seen an all-time low as global energy markets were hit by pandemic.
Aramco received funds of nearly $30 billion with the initial public offering in 2019 after selling 2% shares on the Riyadh bourse. To stop relying on the oil business, the profits were allocated to the kingdom’s sovereign wealth fund for diverse investments. Other challenges included the debts of Aramco which cost sales of non-core assets to sustain a $75 billion dividend, of which a huge share goes to the state.
The shrink in the economy has been the highest in the three decades; additionally, there is a decline in GDP projection by 4%. The kingdom leans on the assets of Aramco for financial aid, an investment of $12.4 billion in its oil pipelines by a U.S.-led consortium might boost the economy along with a gas pipeline deal.