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Saudis Weighing Partial Privatizing of Aramco

April 29, 2002|From Reuters

DUBAI, United Arab Emirates — Saudi Arabia is considering privatizing some of the operations of state-owned Saudi Aramco, the biggest oil-producing company in the world, Saudi Oil Minister Ali Ibrahim Naimi said.

Naimi, addressing Saudi Aramco staffers in Houston on Saturday, did not elaborate. But Western and Saudi industry sources said they believed he was referring to Saudi Aramco's ancillary operations and not the kingdom's key oil and gas facilities.

"We are also studying the possibility of privatizing some of Saudi Aramco's operations," Naimi said in his speech.

Oil industry sources said the kingdom has been considering the idea of privatization at Saudi Aramco since the late 1990s.

"Saudi Aramco, as with many state-run oil firms, has been reviewing this concept for several years," said an industry source in the region. "They are thinking of hiving off services in the medical, housing, transport and educational sectors."

Saudi Aramco was a joint venture with private oil companies until the 1980s, when the Saudi government acquired a 100% interest in its assets. The oil giant offers myriad staff benefits through service units it owns.

Naimi also spoke of the kingdom's decision--unveiled at an energy conference in November in Riyadh, the capital--to set up a publicly held energy services company.

The holding company, which could draw initial investment of $160 million to $220 million, would be similar but not identical to giant Saudi Basic Industries Corp.

Naimi said Saudi Aramco outsources many support services to the Saudi private sector to help spread the wealth generated by its oil production.

Majority ownership in the company would come courtesy of the Saudi private sector, while the government would participate through two existing oil services companies--Arabian Drilling and Arabian Geophysical & Survey.

Saudi corporate law prohibits foreign firms from investing in joint stock companies, but they would be allowed to form joint ventures with subsidiaries of the holding company.

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