"Saudi Aramco, victim of climate stress"

Saudi Arabia has announced that it has lowered its ambitions for the IPO of its national jewel. Investors remain cautious, a sign that traditional finance is evolving and that black gold is no longer popular, analyzes Philippe Escande, economic editorialist at the "World".

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At the Riyadh Stock Exchange in Saudi Arabia on November 17.
At the Riyadh Stock Exchange in Saudi Arabia on November 17. Stringer. / REUTERS

Losses and profits. Venice is far from Riyadh, but Water rising from all sides, in churches and homes, as well as California fires and tropical hurricanes, are shaking the Saudi stock market. The Kingdom of Saudi Arabia has announced that it drastically revised down its ambitions for the flotation of its jewel, the national oil company Aramco. Producing alone nearly 10% of all the world's oil, it is the most profitable company in the world. Its annual net profit exceeds 100 billion dollars (90.42 billion euros). The Kingdom was aiming for a stock market valuation of nearly $ 2 trillion, almost twice the value of Apple, the most expensive listed company in the world. He will have to be satisfied with about 1,600 billion and instead of raking 100 billion in passing by the sale of his shares, he does not discount "only" 25 billion.

Article reserved for our subscribers Read also Saudi Aramco: the Saudi Arabian oil company's flotation

But this spectacular discount was not enough to arouse the craze of major Western investors. As a result, the firm gives up prospecting in the United States, Canada, or Japan, and will focus on local fortunes. Crown Prince Ben Salman, who had already embastished his beleaguered Saudi billionaire friends and cousins ​​in a large hotel in Riyadh, now strongly encourages them to participate in the operation. This is not what we call a global success.

Global economic slowdown

Four reasons urge investors to be cautious. The first is purely financial. The dividend yield around 4.5% is considered lower than that offered by private oil companies like Exxon, Shell or Total which are around 6%. The second reason is geopolitical. The Shiite rebels' attack on the oil installations has shown that the conflict with Iran can affect the heart of its economic activity. Then, the global economic slowdown augurs a decline in oil consumption, and therefore a fall in prices. This can only affect the world's largest company, even if it exploits the most profitable deposits on the planet.

Read also Saudi Aramco, golden egg hen and Achilles heel of Saudi Arabia

The fourth reason is the newest, and potentially the most powerful. The war against fossil fuels is declared due to a climatic emergency. Oil has already lost the battle of electricity production, it loses ground on that of transport. The dramatic shift of car manufacturers towards electricity, pushed by the politicians and the opinion, should cause, before ten years, a falling more and more important of the consumption of the hydrocarbons. Aware of this danger, Aramco is turning more and more to petrochemicals, but the revolt against plastics is also growing against the mountains of accumulating waste. The consumer giant Unilever promises to halve its consumption of non-recycled plastic by 2025.