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Episode 22

On the Saudi Aramco IPO, what it is, its risks, valuation, flawed rationale and why the IPO of the third largest polluter in history, in the era of fighting climate change, is pure hubris and greed. Hero of the Week: Every person that went out for a climate strike worldwide, notwithstanding the deafening silence in Asia. Villain of the Week: Norway's Equinor, for lying to the British public about natural gas' "low carbon footprint" (not!) and getting caught by UK regulators

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On the Saudi Aramco IPO, what it is, its risks, valuation, flawed rationale and why the IPO of the third largest polluter in history, in the era of fighting climate change, is pure hubris and greed. Hero of the Week: Every person that went out for a climate strike worldwide, notwithstanding the deafening silence in Asia. Villain of the Week: Norway’s Equinor, for lying to the British public about natural gas’ “low carbon footprint” (not!) and getting caught by UK regulators

Photo by Assaad W Razzouk

Today I’d like to spend some time talking about the Saudi Aramco IPO and why that IPO should make zero sense to investors worldwide. Welcome to Episode 22 of the Angry Clean Energy Guy with me, Assaad Razzouk.

I am so happy you’re here. Thank you.


So let’s talk about the fact that the Saudis want to do an initial public offering for Saudi Aramco.

In other words, they want to list their state owned oil company, Saudi Aramco on a stock market to share its ownership with you, the public, and you, investors.

They also clearly want to share the climate change risks with you, the public, and you, investors.

Now what are they actually doing? Who is Saudi Aramco and how do we think about the Saudi Aramco IPO? And if this is such a great thing, if Saudi Aramco is such an awesome, amazing company, why would the Saudi government want to sell down its stake and send some of the profits to you, the public and to you, investors?

And in an era where we are clearly in a climate emergency. What are JP Morgan and Goldman Sachs and Citi and HSBC and Credit Suisse actually doing, promoting the stock?  How can they? How do we reconcile their pronouncements about how they are backing the Paris Climate Change Agreement with bringing the Saudi Aramco stock to a stock market near you, the public?

First, let me put the company into perspective. It’s the largest oil company in the world. It’s also the most profitable company in the world because in 2018 it made $110 billion of net income and that was on revenues of $355 billion.

That’s as much as the GDP of Nigeria or South Africa. It’s more than the GDP of Ireland or Denmark or Singapore. It’s simply a huge number.

Saudi Aramco is also the third biggest polluter in the history of the world after the good people of Chevron and the good people of Exxon Mobil.

So Aramco has pumped enough CO2 and methane into the atmosphere to qualify as the third largest polluter in history.

In other words, the Aramco IPO is simultaneously an offer of a humongous-ly large company in terms of its current net income as well as a humongous-ly large polluter in the age of fighting against climate change – because that’s the age we’re in.

We’re in the age of fighting against climate change and here is the third polluter in history that wants your money.

Now let’s talk about Aramco’s Valuation.

The Crown Prince of Saudi Arabia thinks that the company should command a valuation of $2 trillion. That would immediately make it more than twice as valuable as the next biggest company in the world. What the Saudis want is they want to list up to 5% of the company because they want to generate $100 billion or so for their pockets.

And at the moment they are evaluating all sorts of cunning plans of how to convince you, investors worldwide, to give them a hundred billion dollars.

And that could be a domestic listing in Saudi Arabia, followed by a listing in London or New York or Hong Kong or Tokyo. Or it could be a listing in Saudi Arabia and then pumping the stock up to get it to the level that they want and then a listing in London or New York or Tokyo or Hong Kong. They’ve got some of the smartest brains in the world working on this issue and I am sure by the time something is formally announced, it will be a very cunning plan.

And that’s why we have to be very, very careful when we consider the Aramco IPO.

Now I want to just digress and talk about greed for a minute.

The company’s already selected lots of banks, household names to take it public, including:

Bank of America,


Credit Suisse,

Goldman Sachs,

JP Morgan,

Morgan Stanley,


BNP Paribas,

Deutsche Bank


Credit Agricole

Societe Generale

You get the picture. And what is hilarious is that many of these banks are the very same banks that pretend they care about climate change, but God forbid anything should come between them and making a buck now.

So you’ve got all these bright bankers completely focused on the bonuses they will take home once they take the company public because none of them actually care what the stock price does after the company goes public. And isn’t that a wonderful position to be in? You’ve got to love it.

Speaking of markets, the signs on the wall aren’t that bad because when the bankers look at it, what they see is that Aramco raised $12 billion this year in an international bond which had $100 billion of demand, and so they see that the collected $12 billion, but that the demand is $100 billion and they say to themselves, this IPO is going to sell!

Greed then comes in and the attraction of getting paid a big bonus and all these lovely banks suddenly forget about environmental and social and governance criteria.

They forget about climate change.

They forget about the world burning.

They forget even their own words. They forget their websites, they forget their CSR policies, they forget their promises and they go after a quick buck.

How predictable.

Now the $2 trillion that the Saudi want for the company is somewhat of a random number.

Basically the Saudis took an envelope, turned that, and on the back of the envelope and with a very expensive pen, I would assume, calculated how much barrels of reserves they think they have and multiplied that by eight bucks, $8. And they multiplied it by $8 because that’s the benchmark used to value reserves. Saudi has 260 billion barrels of reserves, or at least that’s what it says. And if you multiply that by $8 you get roughly 2 trillion.

And so the Saudi said we want 2 trillion.

And by the way, that makes no sense whatsoever because if you applied that benchmark to Roseneft, the Russian company, its market cap would be multiples of what it is.  And at the same time, Exxon Mobil’s market cap would be a fraction of what it is. So that’s certainly not the only metric that’s applied to derive a valuation.

The $2 trillion also assumes that Saudi Aramco can pump oil until the cows come home. In other words for the next 70 years or however long the financial model of the financial analysts that will be selling that IPO to you, investors, lasts, which obviously is not going to happen and it’s not going to happen because we have reached the end of the age of oil, but let me come back to that in a second.

There are other ways you can value the company. I don’t want to go into the technical details, but basically these other ways do NOT give you $2 trillion. They’ll give you somewhere between $500 billion and $1.2 trillion.

Now let’s talk about risks.

I want to start by a very funny quote from a story in the otherwise very serious Financial Times. It says, quote, “if international demand is lower than expected, the government is expected to ask the segment of rich Saudis to make up any shortfall, said one banker working on the deal” End of quote.

Let me translate that for you. In other words, if international investors do not turn out as expected at the party, then the government’s going to nicely ask rich Saudis to make up the shortfall. And we know some of the techniques available to the Saudi government when it wants to ask nicely. For example, they might invite you to the Ritz Carlton hotel in Saudi Arabia or they might invite you into their consulate in Istanbul, Turkey. So I thought that sentence, just the way it was buried in that article was a gem.

So there’s risk number one.

Risk number two is the Paris climate agreement: If the Paris climate agreement is implemented in any shape or form, this company is not going to pump oil forever and therefore its financial model is not valid. Now the Saudis know that they will probably pump the last drop of oil on the planet, and that’s because their costs of producing oil is lower than anybody else’s. However, it’s quantum that we’re talking about. There is no way the Saudis can continue to pump oil – and not just the Saudis for that matter – at the level that they’re pumping it at because otherwise we’re all going to fry.

In addition, all the signs, early as they may be are that they will not pump all that oil out. Just in the last two weeks, Mercedes-Benz, which put the first internal combustion engine for a car on the market in 1885, announced that it was disc-continuing research and development of internal combustion engines. That. Is. The. End. Of. An Era. They will focus completely on electric vehicles. Even Toyota expects to be free of traditional engines by 2050. Electric buses are taking the road in increasing numbers. Electric cars haven’t even started their big move and gasoline, which you put in cars and buses, accounts for 25% of oil consumed globally.

Now these oil companies also seem to think that the future is plastic. In other words, they want to bury us in a lot more plastic in order to make up for any shortfall of demand from the transportation sector, but they are not going to succeed. The push against plastic is gaining momentum worldwide. Again, just in the last week, the story emerged that India is expected to announce a nationwide ban on single-use plastic in October. That’s India, population 1.3 billion people. India would be the 40th country or so that’s actually decisively moved against single use plastic and that movement is not going back.

That movement is only growing stronger.

Yet another risk is that obviously when a state owned company goes public, you want a discount for the political risks that surround it because it’s controlled by government and when government needs cash, it will raid the company. Just look at the scandal of Petrobras for example, that sent its shares sliding to a 16-year low early last year. Investors in Russia’s Roseneft – as another example – have to deal with sanctions that limit the stocks upside

And Saudi Aramco is Saudi Arabia’s ATM machine. That’s what they live from.

Now, counter-intuitively perhaps, you would buy Saudi Aramco because it’s got the lowest cost and the lowest carbon intensity of reserves in the world, which means that if you hold Exxon and Shell and BP and Rosneft, you might sell your holding of those stocks and buy Saudi Aramco because then the carbon intensity of your portfolio might go down. The Saudi’s are making noises to encourage that switch and the noises that they’re making are that they are working hard to produce the lowest cost oil with the lowest environmental impacts.

Who knows? Maybe that’s true.

The other reason you would buy Saudi Aramco is because if it were to be listed, it will suddenly become THE climate change stock. The stronger the measures we take to fight climate change, the more the stock will drop because it would be almost a direct proxy from that perspective.

Now what would you pay for Saudi Aramco? You can just imagine my solitary brain cell flying around inside my head desperately trying to find another one to bang into to give me an answer. But in my case at least it’s difficult to find another brain cell that would give me that answer. Instinctively though I would say you wouldn’t pay much for Saudi Aramco. The risks are too high and I was talking about it as if it was in Norway, which it’s not.

You could see a couple of weeks ago how its oil installations are vulnerable to all sorts of not that friendly neighbors.

And remember that in the 1930s the two co-founders of the Saudi kingdom, Muhammad ibn Abd al-Wahhab, a religious leader and Ibn Saud, a tribal leader, found common ground despite conflicting goals and built a state built on a compromise whereby the Royal family would strictly conform to the Wahabism religious ideology by embedding it in the political structure of the kingdom. And that’s relevant because this very religious ideology is not a very friendly one. It’s also what Al-Qaida, Daesh, Al-Shabaab and even Nigeria’s Boko Haram follow. So the country has an inherent conflict within it as well as not that friendly neighbors. It’s not Norway.

So there’s not much to say really in conclusion, except why would you take on the headache of Saudi Aramco? Best to stay away from that stock and from the IPO and it’s too bad if the bankers don’t make the bonuses that they’re counting on. I mean, why bother?


My hero of the week is every single person that went out worldwide on a climate strike on September 20 and the week that followed. The climate strike was remarkable on so many levels. It was the largest climate protest in history, yes, of course. But it was one of the largest protests, period, in history.

I do have to say however, that is the silence in Asia was somewhat deafening.

If you look at the number of people that came out in China, Japan, Indonesia, Singapore, Thailand, Vietnam, Laos, Cambodia, for example, it was disproportionately low compared to the climate risk that these countries are running: Five of the top 10 countries most at risk from climate change are in Asia. So I don’t want to dampen the party spirits or anything, but the silence in Asia was deafening.

My villain of the week is Norway’s Equinor. They’re an oil company formerly known as Statoil. Whatever their name, they can’t hide what they’re actually about. They are my villain of the week because UK regulators issued a warning to them over false advertisements on the London underground that implied that gas is a low carbon energy source when we all know that the leakages from gas when you frack it or drill to get it, and then when you pick it up and transport it and refine it and pipeline it, mean that it’s actually dirtier than coal.

Natural gas is dirtier than coal. Yet the Equinor people ran a huge advertising campaign implying that it was a low carbon energy source and they were slapped by UK regulators who stopped them from using that advertisement again.

Equinor, shame on you. False advertising is absolutely terrible. You’re literally trying to brainwash citizens through nice sounding campaigns that are not only false but also misleading, outright lies.

Thanks again everybody for listening.

Remember that you can find transcripts of every single episode within two weeks from that episode going live on my website,

Thanks so much for listening and have a great couple of weeks.

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About Me

There is so much to be angry about, if you are a clean energy guy.

Every day, so many things that happen around the world make me angry when I look at them with lenses colored by the climate change chaos unfolding everywhere around us. And I am especially angry because I know we can solve the climate change crisis if we were only trying.

Each week, I will share with you a few topics that struck me and that I was very angry about – and this will generally have to do with climate change, solar or wind power, plastic pollution, environmental degradation, wildlife, the oceans and other related topics.

Assaad Razzouk

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