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Energy

Saudi Arabia to sell part of its stake in Aramco – world’s biggest oil company

The Saudi Crown Prince, Mohammed bin Salman, has revealed that Saudi Arabia is in discussions to sell a 1% stake of Saudi Aramco to a leading global energy company.

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Lessons for Nigeria from Saudi Aramco

The Saudi Crown Prince, Mohammed bin Salman, has revealed that Saudi Arabia is in discussions to sell a 1% stake of the state oil giant, Saudi Aramco, to a leading global energy company.

This is as he also said that the kingdom is considering transferring the shares of Aramco to the Saudi’s sovereign wealth fund, a public investment fund, and listing some of its shares on the Saudi market as well.

This disclosure was made by the crown prince in a televised remark while speaking on Saudi owned news channel.

READ: Saudi Aramco surpasses Alibaba in world’s largest IPO, raises $25.6 billion

What the Saudi Crown Prince is saying

Salman in his statement said, “I don’t want to give any promises, but there’s a discussion for the acquisition of a 1% stake by a leading global energy company. That will be a great deal to enhance the sales of Aramco in the country where this company (is based),’’ as he did not name the company but said it is from a “huge” country.

He also said there are discussions with other firms, and some Aramco shares could be transferred to the kingdom’s sovereign wealth fund. Some shares may be listed on the Saudi market as well.

The interview marked the fifth anniversary of a multi-billion-dollar plan, the Saudi Vision 2030, which is aimed at diversifying the country’s economy away from oil reliance.

READ: Apple becomes world’s largest public listed company, valued at $1.82 trillion

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On the US-Saudi relations, the crown prince during the interview said Saudi Arabia and the Biden administration disagree on only a few issues.

He said, “We are more than 90% in agreement with the Biden administration when it comes to Saudi and U.S. interests and we are working to strengthen these interests,” the prince said, according to a Reuters translation.

“The matters we disagree on represent less than 10% and we are working to find solutions and understandings … there is no doubt that the United States is a strategic partner.’

READ: Why NNPC should be commercialised

What you should know

  • It can be recalled that Saudi Aramco was the world’s biggest IPO when it went public in December 2019, and listed around 1.5% of its shares on the local stock exchange.
  • The initial public listing raised $25.6 billion, and the company later exercised its “greenshoe option” to sell 450 million more shares, bringing the total size to $29.4 billion.
  • The world’s biggest oil company by market value also paid a whopping $75 billion to its shareholders for the year 2020 even as the coronavirus pandemic affected its earnings.
  • The Saudi government owns more than 98% of Aramco’s shares.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Business News

Nigeria’s revenue crisis may further worsen as India cuts oil imports by $39.5 billion

The revenue to be earned by Nigeria has come under further threat due to India’s drop in crude oil importation.

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Now that oil is recovering, when will naira recover?

The revenue to be earned by Nigeria has come under further threat due to India’s drop in crude oil importation.

Data from India’s Petroleum Planning and Analysis Cell showed that the country, which took over from the United States as Nigeria’s largest crude oil importer, reduced crude oil imports by $39.5 billion in April, compared to the same time the previous year.

According to a report from Punch, the Indian High Commission in Nigeria said that India’s crude oil imports from Nigeria in 2020 amounted to $10.03 billion, representing 17% of Nigeria’s total crude exports for the year.

India has been badly hit by a third wave of the coronavirus pandemic which led to a spike in infections in April and lockdown in major cities with the attendant negative effect on Nigeria’s oil sales.

The NNPC was prompted to drop the official standard price of its main export streams, Bonny Light, Brass River, Erha, and Qua Iboe, by 61-62 cents per barrel, below its April 2021 prices. They traded at $0.9, $0.8, $0.65, $0.97 per barrel respectively, below international benchmarks, as Oilprice.com showed.

India had been a major buyer of the not-too-light and not-too-heavy Nigerian crude that suited its refiners with the Indian Oil Corporation’s refineries reported to be operating at 95% capacity in April, down from 100%.

An official at the IOC was quoted as saying, “If cases continue to rise and curbs are intensified, we may see cuts in refinery runs and lower demand after a month.”

India reportedly bought more American and Canadian oil at the expense of Africa and the Middle East, reducing purchases from members of the Organisation of Petroleum Exporting Countries (OPEC) to around 2.86 million barrels per day.

Bottom line

This is not good news for Nigeria which is facing a serious revenue crisis as a result of a drop in crude oil receipts.

The federal government is also being forced by the prevailing realities to consider cutting the cost of governance and reducing the salaries of government workers. The latter proposal has, however, been criticized by various stakeholders.

A slump in crude oil demand from Nigeria’s major buyer will further worsen the economic crisis the country is facing having just marginally recovered from a recession in the last quarter of 2020.

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Business News

Oil market reacts as Colonial Pipeline cyber attack affects prices

WTI oil futures are currently up by 1.34% (WoW) to $65.35 and the Brent oil futures are currently up by 1.87% (WoW) to $68.82.

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Sequel to the cyber-attack that hit top U.S. fuel pipeline operator, Colonial Pipeline Co., the price of oil has started to improve. During the Asian session on Sunday, WTI oil opened at $65.52, representing a 0.95% gain from Friday’s $64.9, when the incident happened.

WTI oil futures are currently up by 1.34% (WoW) to $65.35 and the Brent oil futures are currently up by 1.87% (WoW) to $68.82.

Colonial Pipeline was forced to shut down its entire operation after the cyberattack. The company so far has given no timeline as to when the pipeline will begin its operation.

“It’s an all-hands-on-deck effort right now… we are working closely with the company, state and local officials, to make sure that they get back up to normal operations as quickly as possible and there aren’t disruptions in supply,” U.S. Commerce Secretary, Gina Raimondo said.

The pipeline is responsible for supplying nearly half of all the fuel consumed on the U.S. East Coast and provides refined products to more than 50 million Americans. Because of this, oil prices are likely to increase at several fuel distribution points, including Wilmington in North Carolina, Charleston in South Carolina, and Savannah in Georgia, Tank Tiger CEO, Ernie Barsamian told Bloomberg.

The U.S. government has issued emergency legislation on Sunday, relaxing rules on the fuel being transported by road. The legislation allows for drivers in 18 states to work extra or more flexible hours when transporting refined petroleum products. The temporary waiver issued enables oil products to be shipped to as far as New York but there are worries that this may not be enough to cover demand. This indicates that the pipeline may not be fully operational for some time.

The attack comes as the U.S. COVID-19 vaccination rate is improving. Americans are once again commuting to the office, planning major travel for the first time and booking flights. A prolonged disruption along the pipeline system threatens to send average U.S. gasoline prices above $3.00 a gallon for the first time since October 2014, further encouraging fears of inflation as commodity prices rally worldwide.

In the meantime, fuel producers in the U.S. are weighing options for how to ship their products to the Northeast in case Colonial isn’t restored quickly. Traders and fuel shippers are seeking vessels to deliver gasoline that would have otherwise been shipped on the pipeline while others are securing tankers to temporarily store gasoline in the U.S. Gulf in the event of a prolonged shutdown.

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