Gulf’s oil IPO trend aims to boost sluggish market

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By CGTN’s Nawied Jabarkhyl

More Middle Eastern states want to publicly list parts of their oil industries. The trend marks a shift in policy as countries in the region look to open up their once closed economies.

Several Middle Eastern states want to sell off parts of their oil industries.

Led by Saudi Aramco’s record-breaking Initial Public Offering (IPO) plans, others like Kuwait, Oman and Abu Dhabi are also eyeing public listings.

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Experts see the IPO plans as the best measure to help reform current market rules and upgrade traditional business models.

“The oil companies are traditionally viewed as state-dominated, where the ruling family calls the shots and they’re less run as businesses and more as political tools. So, this will be a step in the right direction,” said Adal Mirza, editor of S and P Global Platts.

Saudi Arabia hopes to raise 100 billion US dollars through the sale of around five percent of Aramco next year.

However, Abu Dhabi National Oil Company (ADNOC), which is owned by the government, isn’t willing to give up as much control.

It is targeting an IPO to raise a more modest 1.5 to two billion US dollars.

Aside from attracting investment into the industry, the plans are part of a wider privatization drive across the Middle East, as most countries try to come to terms with lower crude prices.

Unsurprisingly, most of the companies want to go public in their home markets, before looking at international exchanges.

Given the size and complexity of the listings, industry sources expect ADNOC’s to surface towards the end of this year, with Aramco’s planned for 2018.

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These possible IPOs are also seen as positive news by Gulf stock markets, many of which have been sluggish recently.

The offerings will likely have a lasting impact, not just for regional markets but also for economies that have long been fueled by oil.

Moreover, analysts say the IPO plans could improve standards of oil, as well as investor sentiment in the area.

“The whole capital markets agenda is really around deepening those capital markets, and giving investors more choice in terms of different segments to invest into. But not only that, what they’re also bringing into the frame is really transparency and governance. They want to promote that kind of transparency and governance,” said Mayur Pau, Middle East and North Africa IPO leader from Ernst and Young.