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Abu Dhabi, UAETuesday 22 January 2019

Saudi Aramco to issue $10bn bond in 'a few weeks', says energy minister

Khaled Al Falih said the independent audit of Saudi reserves shows the kingdom is fully equipped to replenish barrels

Saudi oil minister Khalid Al Falih speaks at the Atlantic Council Global Energy Forum in Abu Dhabi. Prices below $60 would be cause for concern, he said. Victor Besa / The National
Saudi oil minister Khalid Al Falih speaks at the Atlantic Council Global Energy Forum in Abu Dhabi. Prices below $60 would be cause for concern, he said. Victor Besa / The National

Saudi Aramco to issue $10bn bond in "a few weeks", says energy minister

Khaled Al Falih said the independent audit of Saudi reserves shows the kingdom is fully equipped to replenish barrels

Saudi Aramco, the world's biggest oil producing company, is likely to issue a $10 billion bond in the next few weeks to help finance its acquisition of petrochemicals company Sabic, the kingdom’s energy minister Khalid Al Falih said.

The Saudi oil behemoth is in talks to buy a 70 per cent stake in Sabic, the largest listed company in the Middle East.

“It will be probably in the $10bn range,” Mr Al Falih said on Sunday. “We’ll decide in the next few weeks.”

Saudi Arabia, the world’s biggest oil exporter, is beefing up the petrochemical portfolio of Saudi Aramco as it prepares the company for its initial public offering by 2021.

Saudi Arabia conducted an independent audit of its hydrocarbon reserves that slightly increased the kingdom’s and Aramco’s oil and gas deposits, a move that will help the bond issuance, according to analysts.

Aramco’s concession area oil reserves were 2.2 billion barrels higher or 263.2 billion barrels of oil and 319.5 trillion standard cubic feet of gas out of the total. The kingdom's total oil reserves were up 0.8 per cent to 268.5 billion barrels for the figures recorded at the end of December 2017, while total gas reserves were revised up 5.6 per cent to 325.1 trillion standard cubic feet.

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Mr Al Falih said the increase was an indication that the producer has been able to successfully replace the natural decline in fields through increased production over decades.

"No reason to think we can’t continue to do that. We’ve done it successfully for so many decades,” Mr Al Falih told the Atlantic Council Global Energy Forum in Abu Dhabi.

Saudi Arabia, the biggest crude producer in the oil exporters group Opec, is currently trimming its production to comply with a global oil pact struck between Opec and countries led by Russia. Opec+, as the alliance is called, started this month cutting its output by 1.2 million barrels of oil per day for a period of six months, with a view to review the deal in April.

Opec wants to lower oil inventories to their five-year average, a level that is deemed adequate to balance a market awash with US shale oil.

“I am concerned about recent volatility [in the oil price] and prevailing negative sentiment but the present fundamentals are clearly trending in the right direction,” Mr Al Falih said. “Demand growth remains healthy two weeks into the new year and the forecast not only for 2019 and also beyond is for 1.3 to 1.5 million barrels per day,” he added.

Record production in the US thanks to its rising shale output has contributed to the steep gyrations in the price of Brent, which hit a four-year high of $86 a barrel in early October only to shed 30 per cent of its value a month after and it dipped below $60 a barrel in December.

Brent was trading down around 2 per cent to $60.5 per barrel in morning trading in London.

“We got the signal from the market that below $60 per barrel .... to get your act together, do something,” said Mr Al Falih.

“When we hit $86, people were predicting $100+ and the signals we were getting was that we need to cool the markets, which we did. This range of volatility is what I’m happier with,” he added.

Updated: January 13, 2019 06:47 PM

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