Published on March 13th, 2017 | by James Ayre0
Saudi Aramco Oil Reserves Being Audited By Western Groups In Preparation For IPO
March 13th, 2017 by James Ayre
It’s long been a mystery what the real-world situation is with Saudi Aramco’s oil reserves, as the state-owned firm has been reporting the same 261 billion barrels reserve figure for the last 30 years or — with no changes, despite pumping out large quantities of oil every year.
Decline rates on the firm’s major fields have remained an unknown as well, as has the quality of the reserves.
In anticipation of Saudi Aramco listing shares in an initial public offering (IPO) for 5% of the firm’s value in 2018, though, there’s currently an audit underway that includes Dallas-based DeGolyer & MacNaughton, and Gaffney, Cline & Associates (part of Baker Hughes). This is SEC audit is taking place so that Saudi Aramco can be listed on a stock exchange in New York.
Something worth noting here is that the SEC began a probe last year trying to determine why ExxonMobil’s reported reserves remained unchanged for years despite the enormous drop in prices seen in recent times — that probe led to ExxonMobil revising its reserve figures downward last month.
Saudi Energy Minister Khalid al-Falih has made comments in recent days suggesting that there may be surprises as regards reserve figures (the suggestion being that actual reserves are higher than stated). Unnamed industry sources have commented, though, that details on individual deposits will be sparse, and thus hard to put into context.
Al-Falih stated: “Our reserves have been partially audited and are bigger than we actually booked. On every metric, Aramco will surprise analysts on the upside — lowest cost, highest cash flow, solid reserves that will be certified by third-party agencies.”
All of that said, given the amount of political and economic influence that Saudi Aramco has, I’m a bit unsure of how serious the eventual audit results should be taken.
Reuters provides more:
“An industry source told Reuters that Aramco aimed to have one of its two reserves auditors wrap up the review this year, long before the share listing. …When the reserves are confirmed by the auditors, the results are likely to be similar to the levels of disclosure by international peers such as BP and Royal Dutch/Shell, sources familiar with the process said. … A reserves total that is significantly above or below the 261 billion figure is likely to affect Aramco’s potential value. Earlier phases of the audit have supported Aramco’s statements on the total size of deposits.
“Aramco is showing all its data to the auditors, the sources said, and is using two firms rather than one in an effort to bolster confidence that the process is not a rubber-stamping of Aramco figures. … Aramco’s precise level of disclosure has yet to be decided, the source familiar with the plans said. He noted that Western majors do not list reserves by field.”
Another unnamed industry source commented that Saudi Aramco considers reserve decline rates and field maturity to be “sensitive, non-public data” — hence, “there is no way Aramco will be giving field-by-field detailed reserves.”
Which means that we aren’t likely to get any more information on the state of the massive Ghawar field that so much of the country’s revenue comes from.
As a reminder here, for those who haven’t been paying attention, Saudi Arabia’s continued “interest” in Yemen is driven to a large degree by oil. In addition to the presence of untapped oil reserves in Yemen (the lack of development being the result of backroom deals made with previous rulers there, by most accounts), another one of the drivers of the country’s continued bombing campaign in Yemen (which is supported by the US and other western allies) is the fact that many of those who live in the parts of Saudi Arabia that are home to substantial oil reserves are in fact Shia, and some of these locals maintain ties with those in Yemen.