Is Aramco on a USD 35 bn privatization push?

Aramco is reportedly preparing the biggest privatization drive in its history, lining up asset sales that could fetch as much as USD 35 bn in total, Bloomberg reports, citing people it says are familiar with the matter. The energy giant is moving ahead with the plan despite the regional war that erupted on 28 February, with bankers expecting a steady pipeline of agreements to land in front of global private equity and infrastructure investors in the coming months.

The catalyst: A BlackRock-led group signed a USD 11 bn lease agreement back in August covering Jafurah Field Gas Plant and the Riyas NGL Fractionation facility. The response from global funds was strong enough to convince executives in Dhahran that there is real appetite for more, the sources told the business information service, adding the new wave of divestments will span energy facilities, infrastructure, and even real estate.

What's on the block: Transactions in the works include a sale-and-leaseback of real estate assets that could include Aramco’s headquarters campus in the Eastern Province, a stake sale in its oil export and storage terminals, and agreements involving gas-fired power plants and its water infrastructure business, according to the business information service. Aramco wants to keep full control of its upstream business but is willing to part with minority stakes in midstream and downstream assets, the sources added.

The thinking has shifted with the war: “Before the spending cuts in megaprojects and the Iran War hit to export volumes, this might have been interpreted as Aramco reducing exposure to non-core assets,” Tellimer's head of emerging market equity and geopolitical strategy Hasnain Malik told the business information service. “But now this is going to be considered as maximizing access to liquidity for Aramco and its sovereign shareholder.”

Why the timing matters for Riyadh: The agreements double as a signal that Saudi Arabia can still pull in foreign capital while Iranian attacks on Gulf cities and infrastructure continue. They also feed into a metric the Kingdom badly needs to move: FDI, which is still running well short of the USD 100 bn annual target set for the end of the decade.