In any flotation of this size there is this tendency of commentators and even of finance practitioners to talk in high sounding but windy generalities. Aramco is composed of so many variables. Does the valuation encompass the entire business? Overground, underground or dispersed elsewhere? There are the many uncertainties in the Gulf geopolitics. Any objective report by investment bankers must define all these.
Let me put some flesh on all this.
When I was employed by the EC external affairs in Brussels in 1992-93 as central banking consultant, one mission was to go to Tyumen Oblast in Western Siberia to restructure Russia’s Sberbank (Savings Bank).
In this mission there were many oil experts from the Italian ENI and others. I now heard these same experts saying outright that Russia's oil and gas reserves would last for next 200 years and would in fact do so without taking into account areas such as Bashkiria and other Siberian reserves and also the Arctic regions.
Now we learn of President Putin launching a giant US$27 billion Arctic Yamal project.
The owners of this project are the French TOTAL, Chinese CNPC and the Silk Road Fund and the Russian NOVATEK.
In short, the value realised by Aramco will be an outcome, a coefficient, of all the other sources, and in geopolitical terms, the availability and the security of access to those sources.
Interest has centred around an Aramco sample or cat’s paw listing of five percent next year. Which stock market do you think will be favoured with the listing?
Any stock market requires liquidity potential for underwriting. In my opinion, the New York Stock Exchange has that capacity for such a big issue over all other Exchanges. Eighty percent of world trade is conducted in $US so it is hard to see why any IPO of this scope should be an exception.
There is a conventional wisdom in the West now to the effect that Aramco is a diminishing asset because of shale, electric powered vehicles and other alternative sources of energy?
Conventional wisdom must always be taken seriously
In this context are you worried or encouraged by France especially running down its nuclear energy capability to the extent that French nuclear power station construction technology is diminishing?
Because of Ukraine’s Tchernobyl catastrophe and due to the subsequent pronounced change of public opinion in the French and Germany societies, the governments of these countries are running down their nuclear energy capabilities. In my opinion, it is due to safety and security reasons and I include here threats from terrorism as well as operational mishaps such as at Tchernobyl
When we last talked you pointed out that the Australian trading banks, contrary to local legend, are owned internationally, and not just in Australia. How do you see them now?
Australian banks have found themselves in very recent times censured for giving doubtful advice to their clients. This is something that begs the question of the intervention of the Reserve Bank of Australia in regard to encouraging mergers and acquisitions or even the contemplation of them in order to improve the counsel being offered. There is nothing permanent about any banking establishment, even Australia’s. So this development subsequent to our last talk indicates now a stringent evaluation of the sector internally, and by its external regulators.
A marketing device used by banks everywhere is this imperative to preserve an image of permanence via for example grandiose Doric columned edifices and ennobled directorates. Yet as we have seen, and will continue to see, so often all this window-dressing can be at variance with the true state of their cash positions.