the race for Aramco technologies questioned by the IPO?


AFP, published on Sunday, November 10, 2019 at 12:41

Robots with sniffing drones, the Saudi oil giant Aramco invests in technological innovations despite low crude prices, but its long-awaited IPO could undermine its strategy against the desire for rapid gains from private investors.

For the first time, Saudi Arabia is proposing to sell part of its national flagship on the financial market of Riyadh, in an operation presented as the cornerstone of an ambitious plan by Crown Prince Mohammed bin Salman to reform the economy. his country is too dependent on oil.

The Aramco IPO in Riyadh, and eventually later on an international market, would increase the pressure of higher profit margins on a company that, until now, was only responsible to the government.

"Aramco has never had to answer to investors demanding its quarterly results, and that will change with the IPO," Ellen Wald, author of the book "Saudi Inc", told AFP.

In recent years, the most profitable company in the world has increased its research and development spending while most of its competitors have decreased because of lower crude prices.

Aramco reported spending $ 591 million in 2018 on research, compared with $ 507 million in 2017.

– Drones "sniffers" –

His technological achievements were presented to the press during a recent visit to his vast headquarters in Dhahran, eastern Saudi Arabia, with suburban American airs with its neat buildings, schools and shopping malls. live 15,000 employees.

In a control room, engineers were at the controls of computers in front of giant screens indicating the flow of oil from production fields to refineries or export terminals to the world.

Employees presented to the press the innovations in drilling, agile robots that crawl on oil pipelines to carry out repairs, and "sniffer" drones detecting leaks.

"Over the past five years, our R & D spending has more than doubled," said Ahmad al-Khowaiter, Aramco's technology division director.

The juggernaut of black gold claims that its 1,300 engineers in 12 research centers around the world – from Beijing to Detroit – allow it to file new patents each year.

But, according to the company, net income in the first half of 2019 fell nearly 12% to $ 46.9 billion, due to lower crude prices.

And, the firm remains vulnerable to price fluctuations, some Saudis fear that the IPO requires him to comply with the requirements of its future shareholders.

"Research creates useful technologies for Aramco (but) some projects may not be commercially viable," says Ellen Wald.

"It is understandable that some members of the company are concerned that there is pressure to reduce or change its strategy in research and development," she says.

– "Milking cow" –

According to analysts, Aramco could offer 2 or 3% of its shares in the financial market of Ryad – the inscriptions to the tender offer will begin on November 17. An introduction to an international place remains uncertain.

Saudi Arabia intends to use this operation to finance an ambitious program to diversify its economy.

But analysts wonder if the IPO will be constructive for Aramco.

"Aramco is the mainstay of the Saudi economy," observes the group Energy Intelligence in an analysis, with "a corporate culture and skills (…) recognized as the best in the Middle East".

"By bringing Aramco on the stock exchange, Ryad may touch his latest milk cow," warns the group.

Shareholders are unlikely to bring about a radical change in the company's strategy, but there could be pressure if stock prices fall, analysts say.

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