Fire and Flood Make Saudi Aramco IPO in Hard Sale

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Saudi Aramco has the right to achieve the largest raw reserves to achieve the lowest carbon footprint, but loses the point. The oil-related climate concerns do not relate to the carbon cost of getting out of the ground, but about what is subsequently done with it.

The age of the oil may not be far away – but oil has an unprecedented backbone. Here is an example from recent weeks and months:

Venice Mayor Luigi Brugnaro said last week that climate change is a threat to the historic maritime city, which suffered the second highest highest tide. The worst floods have been associated with parts of northern England for many years, and millions have been displaced as the Chiconal Bulbul met Bangladesh and India in the north.

There are no new storms and floods, but they are becoming more intense, more frequent and causing more damage as sea levels and climate changes increase – at least partly linked to fossil fuel burning.

Unprecedented fireplaces are leaving from parts of eastern Australia, making them dried by two years drought. Wild fires forced hundreds of thousands of Californians to flee their homes earlier this month. Russia is suffering one of its worst years for forest fires. Once again, climate change is contributing to the creation of warm, dry conditions that allowed fires to spread.

Climate change is melting as well as the overhead of Russia. It is not a problem for Saudi Aramco, maybe, but it certainly is one of the Russian oil industry, which depends on infrastructure built in the 1970s on the ground that is not able to support the weight it was 40 years ago.

Climate concerns are continuing to reflect public opinion against hydrocarbons, including oil.

What is more, the pressure on the oil and gas industry is due to pollution caused by exhaust pipelines, accidents involving oil tankers, or drilling rigs. Fossil fuel burning particle emissions are behind rising mortality rates, resulting in stricter controls on ship fuels, measures to drive cars and vans out of the city center and increased pressure on airlines to find alternatives.

Aramco has a solution to the danger in the industry – petrochemical. The company wants to convert 40% of its crude oil into chemicals, according to Abdulaziz Al-Judaimi, Senior Vice President of Saudi Aramco for the stream.

But petrochemicals are also under pressure.

More than 200 businesses have made commitments worldwide, from Coca-Cola Co. Kildare. to the giant food and consumer giant Unilever NV, to reduce plastic waste, according to the Ellen MacArthur Foundation. Unilever aims to reduce the use of virgin plastics by 2025. The Coca-Cola target is that the bottles will have an average recycled content of 50% by 2030. Similar initiatives will take the projected demand on new plastic.

More than 200 businesses worldwide, from Unilever NV to Coca-Cola Co., have made commitments to reduce plastic waste, according to the Ellen MacArthur Foundation. Unilever NV aims to reduce the use of virgin plastics by 2025. It is proposed by Coca-Cola Co. Kildare. The bottles will have an average of 50% recycled materials by 2030. Similar initiatives will bring the projected demand for new plastics.

And then there is an issue specific to Saudi Aramco – security of its facilities.

The company made an excellent job in restoring output levels following a devastating attack on its oil facilities in September, using spare capacity elsewhere to boost flows. However, potential investors are concerned about the potential of the attacks in relation to the ability of Saudi Arabia to protect its oil infrastructure.

It was the time to introduce private investors in Saudi Aramco when everyone wanted a piece of the action. Twenty years ago investors would have fallen apart taking a path to Saudi Aramco's door. It is now a tougher sale.

To contact the author of this story: Julian Lee at jlee1627@bloomberg.net

To contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or the Bloomberg LP and its owners.

Julian Lee is oil strategy for Bloomberg. Previously he worked as a senior analyst at the Center for Global Energy Studies.

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