Saudi Arabia’s plans to float state oil titan Aramco are prompting the country to think the unthinkable.
Late last year, Saudi Arabia tried to get fellow oil producers around the world to agree to reduce production. Before an OPEC meeting in Vienna in November, Saudi officials were armed with an unprecedented bargaining chip: if there was no deal, the kingdom would quit the exporter group altogether.
The strategy was approved at the highest level of the Saudi government, said sources familiar with the matter.
It was not only aimed at ensuring the smooth workings of the world’s energy supply. It was also driven by a desire to push up oil prices to maximize the valuation of Saudi Aramco ahead of the listing, said the sources who declined to be named as the information is confidential.
In the end, the world’s biggest oil exporter did not have to enact that option. OPEC members along with non-OPEC producers including Russia agreed a deal in December to cut output by about 1.8 million barrels per day.
But the fact such a move was considered shows how Aramco’s initial public offering (IPO) – expected to be the biggest in history – is forcing the kingdom to rethink its OPEC policies.
Riyadh’s stance represented a shift, OPEC sources said, from its decades-old role of advocating restraint and seeking to convince fellow members like Algeria, Venezuela and Iran that prices rising too fast benefited alternative energy providers.
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