Saudi Arabia Sees Its Oil Reserves Lasting Another 70 Yearsby
Saudi crude reserves not reviewed by independent consultants
Country planning to sell bonds, stake in state producer Aramco
Saudi Arabia, the biggest oil exporter, sees its crude reserves of 266.5 billion barrels lasting 70 more years and hasn’t sought an independent consultant to review the figures, according to a bond prospectus seen by Bloomberg News.
The nation’s wealth is based mainly on oil, with crude sales accounting for 75 percent of total export earnings, according to the prospectus. Saudi Arabia plans to sell at least $10 billion in bonds maturing in five, 10 and 30 years, and it disclosed plans to hold investor meetings in London, Los Angeles, Boston and New York starting on Wednesday.
The country is seeking funds to shore up public finances that have been hit by the drop in oil prices to about half their 2014 levels. At the same time, the kingdom plans to wean itself off dependence on oil for state revenue by selling part of its state oil company to help develop industries including auto manufacturing and technology. State-run Saudi Arabian Oil Co. plans to sell shares to investors by 2018 and is still deciding where to list the shares, Chief Executive Officer Amin Nasser said in Istanbul today.
“Saudi Aramco disclosing more information on its reserves is a major step needed before listing its shares,” Chris Gunson, a partner with Amereller Legal Consultants, said by phone from Munich. “It’s one thing to fulfill regulatory requirements, it’s another to see what investors will require to convince them to buy the stock -- they may well require independent verification.”
International oil companies report reserves -- the amount of hydrocarbons to which they have access and which they can profitably pump -- to show they’re finding enough new deposits to replace the crude they’re selling. Saudi Arabia’s reserves are the world’s second largest after Venezuela’s, according to BP’s annual statistical review. Saudi Aramco would be an anomaly among listed oil companies since its reserves make up the bulk of a single country’s oil.
Saudi Aramco will open its financial data for investors, Nasser said today. The company is evaluating listing shares on stock exchanges including those in New York, London and Tokyo, he said.
The kingdom could sell stakes either in Saudi Aramco, which held about 261 billion barrels of total Saudi reserves, its subsidiaries, or both, according to the prospectus. The Saudi methodology for calculating its reserves may differ from that used by other producers or U.S. securities regulators, according to the prospectus.
In the U.S., the Securities and Exchange Commission regulates reserve calculations made by companies that are publicly traded in the country. Companies are not required to have a third party audit their reserve data, according to rules posted on the SEC website.