It’ll be the largest stock market listing ever as the world’s leader in carbon emissions prepares for its initial public offering (IPO).
Saudi-owned Aramco aims to list 5% of its shares on the Riyadh-based bourse in December with Saudi Crown Prince Mohammed bin Salman insisting that the oil giant is valued at $2-trillion.
The IPO could raise $30-billion in capital for the firm, according to Forbes. This would be the largest in history, removing Chinese e-commerce firm Alibaba from the top spot. The latter raised $25-billion in its IPO in 2014.
The company, which produces 10.3-million barrels of oil a day and employs 76 000 staff worldwide, generated profits of $111-billion last year, surpassing oil companies Royal Dutch Shell and ExxonMobil, as well as tech giant Apple.
Aramco admits in its 469-page prospectus that the effect of climate change and the demand for and price of hydrocarbons could cause the company to “incur costs or invest in additional capital”. It notes that future and existing climate change concerns may result in increased litigation against the company as climate regulations, policies and other actions are reflected in government policies and public sentiment.
These actions could have a material adverse effect on the company’s business, financial condition and results of operation, it says.
Aramco is the world’s biggest emitter of carbon dioxide and methane, with The Guardian reporting that the oil company tops the list of 20 global companies that have produced 35% of all energy-related carbon dioxide and methane emissions since 1965.
Adam McGibbon, a senior campaigner at Global Witness, an international anticorruption campaign, told the Mail & Guardian that these investments “don’t just show a disregard for climate science, they show contempt for the millions of people already suffering across the world”.
“If Aramco burns all of its oil and gas reserves — which is what they want to do — it would produce 112 gigatonnes of carbon dioxide. According to the Intergovernmental Panel on Climate Change that’s about one-third of the entire remaining carbon dioxide that the world can ever emit if we want to stay under the Paris Agreement target 1.5°C degrees,” he said.
Nine banks — Citigroup, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Merrill Lynch, Morgan Stanley, NCB Capital and Samba Capital & Investment Management Company — are overseeing the transaction. This despite these banks detailing on their websites their efforts to align their business practices with fighting climate change.
Global Witness, together with nine other environmental groups — Friends of the Earth US, Oil Change International, Rainforest Action Network, Sierra Club, Indigenous Environmental Network, 350.org, BankTrack, Earthworks and Share Action, co-signed a letter sent to the nine banks earlier this month — saying that their involvement with the oil company obstructs global efforts to fight climate change and human rights abuses. Global Witness has accused the banks of aiding and abetting Aramco in undermining global efforts to reduce emissions.
“The banks are facilitating a huge injection of capital into the world’s biggest polluter at a time when scientists are telling us that our global emissions need to peak immediately and drop sharply after that. Put simply, these investments mean death, and these banks would rather make a bit more money [than] do the moral thing and back away,” he said.
The company’s decision to go public comes at a time when there is growing agreement among financial institutions that aligning business practices to the goals of the Paris Agreement is an essential part of risk management.
A study published in the journal BioScience showed global institutional divestment in fossil fuels had topped $7-trillion.
Aramco says in its prospectus that it plans to expand its gas business “to meet large and growing domestic demand for low-cost clean energy and swing production capacity in the peak summer season by increasing production and investing in additional infrastructure”.
To mitigate the growing demand for cleaner energy, the company says it is pursuing initiatives to manage the carbon footprint of its operations by implementing “flare gas recovery systems, energy efficiency programmes, leak detection and repair programmes and evaluating the potential utilisation of carbon dioxide in various applications, such as enhanced oil recovery”.
In December 2017, Saudi Arabia announced that it would phase out its reliance on fossil fuels. In the same year it also launched a $30-billion to $50-billon renewable energy tender programme.
Thando Maeko is an Adamela Trust Business reporter at the Mail & Guardian