The global oil market could be entering unchartered waters in the coming weeks. After the US shale revolution, which threatened OPEC’s hold on and the stability of the market, a new danger is lurking around the corner.
The Aramco IPO, the largest IPO in history, will not only impact OPEC but will also have repercussions for the Kingdom, Crown Prince Mohammed bin Salman, and the entire GCC region.
Most analysts have pointed out that there are some major issues with the company’s financials, its valuation and possible returns for the Kingdom. International banks are presenting their own IPO valuations, indicating a wide range of price targets, leaving a lot of room for speculation. At the same time, Aramco’s IPO prospectus indicates some threats which seem not to have been included in most analyses, such as the impact of flattening oil demand growth, potential legal repercussions if listed on Western stock exchanges and the potential lack of interest from US and European institutional investors.
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And the financials are just one thing analysts are reviewing. Legal risks, including the 9/11 bill, the attitude of the US congress, and the NOPEC bill could pose a major threat to the future of Aramco.
The possibility of investing in an oil company that could be sued for so-called terrorism or violent actions taken by third parties may be new but oil companies have always been targets of legal cases.
In the recent past, we have seen several court cases and class action lawsuits against companies such as Shell, ENI, Total and BP. And, when listed, Aramco will be more of a “normal” company than it has ever been. Saudi Arabia is taking a risk that is not yet quantifiable but which presents a ‘clear and present danger’.
Aramco could also be facing the same scrutiny that other IOCs are currently facing from global warming activists. If climate cases are filed in the US, or some European countries, Aramco could find itself in trouble. Multi-billion-dollar claims should be expected as activists will see the world’s biggest oil company as a symbol against which their cause can rally. (RT)