MAJOR: Saudi Aramco Delays Listing Over Yemeni Attacks

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RIYADH – Saudi authorities have effectively delayed plans for floating state-run Aramco oil company on the stock market after Yemeni drone raids on oil installations earlier this month, according to report. The Reuters news agency cited sources with direct knowledge of Aramco’s future plans as saying on Tuesday that initial public offering (IPO) of the company would not take place this year despite pledges given by senior Saudi energy officials that the listing would take place by early November.

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“They need to build confidence – in addition to restoring production,” one of the sources stated, making a reference to last Saturday’s attacks by Yemen’s Houthi Ansarullah movement on Aramco’s Khurais and Abqaiq plants, which process and clean crude. Aramco officials had announced last year that the company would offer one percent of its shares for sale on the domestic stock market as early as November 2019.

The IPO had been expected as a first step for the company to sell five percent of stakes and raise at least $100 billion to help the Saudi government fund an ambitious plan for modernizing its economy and diversifying it away from oil. However, attacks on oil installations have been seen as a major blow to Crown Prince Mohammad bin Salman and his Vision 2030 plan.

Reports suggest the young crown prince has been struggling to find new buyers for shares of Aramco, the world’s largest oil company which he has valued at $2 trillion. Experts underlined that the attacks on Aramco oil installations have clearly discouraged investors from buying company shares as the drone strikes by the Yemenis have exposed serious vulnerabilities in Saudi Arabia’s ability to protect its assets.

The Reuters said Aramco authorities had held emergency meetings with bankers and analysts after the attacks to find a way forward on the company’s IPO. It added that investors have been clearly opposed to the Saudi-proposed timeline for listing on the domestic bourse. Aramco has also told Japan’s top oil distributor about a possible change in shipments, raising concerns about Riyadh’s ability to supply crude oil a week after attacks on two huge oil processing facilities, the Nikkei Asian Review reported.

Aramco did not say why it wants to change the oil grade it supplies to JXTG Nippon Oil & Energy from light to heavy and medium, starting in October, JXTG officials stated. JXTG officials noted that they suspect that Aramco is taking more time than expected to repair its desulfurization facility, which is necessary to produce light-grade crude used in the production of gasoline and light gas oil, despite repeated assurances that the company’s supply would be restored soon.

Several Yemeni drones targeted Aramco oil facilities in Abqaiq and Khurais last Saturday. The attacks shut down at least 35-50 percent of the kingdom’s crude and gas production and cut the state oil giant’s crude oil supply by around 5.7 million barrels per day. A return to normal production could take months, not weeks, according to reports.

The drone raid by Yemen’s Houthi Ansarullah movement affected mainly light crude grades resulting in the shutdown of the pipeline from which Bahrain’s Bapco receives oil from state oil giant Aramco, Reuters reported citing two trade sources. The pipeline carries 220,000-230,000 barrels per day (bpd) and transfers Arab Light crude. The Bahraini company is looking for other ways to get about 2 million barrels of Saudi crude and may use vessels for transportation.

Aramco has also informed PetroChina that some of its loadings of light crude oil for October will be delayed by up to about 10 days after attacks on the kingdom’s oil facilities, a senior Chinese state oil source with knowledge of the matter stated. Oil refiners in Japan are gathering information on supplies from Saudi Arabia following the attack on the kingdom’s key crude oil facilities over the weekend, company officials noted.

Aramco has told Indian refiners that it can’t deliver the premium-grade Arab Light crude they ordered. Instead, the company will send heavy, lower-grade crude, The Wall Street Journal reported. Market and industry experts believe that the incident could stoke already-flaring tensions in the Middle East, driving crude prices higher amid growing fears of supply shortages. The consequences of the strikes led to uncertainty in the oil market as it’s unclear when the giant company can restore operations to normal.

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