Saudi Aramco (SA) has flagged oil demand as one of the primary risks to its IPO, predicting that demand will peak in the next 20 years.
The company’s prospectus, released ahead of its upcoming IPO, pinpointed the mid-2030s as the most likely time for “peak oil”.
But the prospectus also flagged a situation where the transition to fossil fuels is completed earlier than anticipated, in the late 2020s.
The view is a departure from tradition for SA, which has previously held that oil demand would peak in 2040, if at all.
However, the company isn’t particularly concerned about the impact that peak oil could have on their bottom line.
SA expects an increase in market share from lowest cost producers – including the kingdom, whose share of global supply is expected to increase at a compound annual growth rate of 0.9 per cent until 2050.
The prospectus also flags a number of other risks to global oil demand, including economic and geopolitical political events, such as the redrawing of trade routes; decisions regarding production levels by the kingdom, which will maintain control of the company after the IPO; and ESG and climate change-driven divestment from petroleum producers.
Ironically, the kingdom is likely to use the proceeds of the IPO to diversify out of the petroleum trade by investing billions into tourism and entertainment.
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