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for additional “incentive fees.” Quoting three unnamed sources who were familiar with the IPO, it said that the banks had asked for more because they believed their earnings from the deal had been relatively low.
Two of the agency’s sources noted that the nine banks appointed to act as joint global co-or- dinators of the issue were set to collect less than $5mn each. This is quite a low fee, given that the IPO brought in such a large amount, they commented.
As a result, the sources said, the banks are seeking to convince Saudi Aramco to act in accordance with a clause in their contract that permits the NOC to offer extra money as an
incentive in the event of a successful listing. One source said that representatives of the banks were justifying this action by arguing that “incentive fees” would help ensure continued co-operation if the oil company ever opted to sell more shares on international stock exchanges.
As of press time, neither Saudi Aramco nor the banks had commented on Reuters’ report. The NOC named the following banks as its joint global co-ordinators last September: Bank of America Merrill Lynch (US), Citigroup (US), Credit Suisse (Switzerland), Goldman Sachs, hSBC (UK), JPMorgan (US), Morgan Stanley (US), NCB Capital (Saudi Arabia) and Samba Financial Group (Saudi Arabia).
Aramco continues to focus on crude expansion
sauDI arabIa
A report by GlobalData, ‘Saudi Aramco after IPO – Company Overview and Development Outlook’, has said that that Aramco’s five major expansion projects – four crude and one natural gas – are being planned to boost output in the country.
One eighth of the world’s crude oil from 2016 to 2018 was produced by Saudi Aramco. As well as being the world’s largest oil-producing com- pany, it is also the most reliant on oil production, with 88% of its total 2018 upstream output deriv- ing from crude.
Somayeh Davodi, oil and gas analyst at GlobalData, commented: “The major expan- sions at Saudi Aramco’s offshore oilfields of Marjan, Zuluf, Safaniyah and Berri are expected to comprise the majority of the company’s
upstream investment over the next three years. Although these developments will also add gas and NGL capacity, the main addition will be oil.”
In 2018, the company’s MSC capacity (max- imum barrels of crude oil that can be produced during a year) was 12mn barrels per day, with 10.5mn bpd oil produced plus the remaining 1.5mn bpd available as spare capacity.
This capacity allows flexibility to respond to market supply and demand fluctuations. The new expansions will add 1.45mn bpd of addi- tional oil capacity. Davodi adds: “Future pro- duction, including the ability to realise output gains from new capacity additions, is likely to be highly dependent on OPEC quotas. Production cuts are set to continue into 2020, but could be extended further.”
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