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An oil tank is seen at the production facility at Saudi Aramco's Shaybah oilfield in the Empty Quarter, Saudi Arabia.

Ahmed Jadallah/Reuters

Saudi Arabia plans a gradual listing of Aramco on its domestic market, sources familiar with the matter said on Monday, as it finalizes the roles banks will play in the initial public offering (IPO) of the world’s biggest oil company.

The kingdom intends to list 1 per cent of the state oil giant on the Riyadh stock exchange before the end of this year and another 1 per cent in 2020, the sources said, as initial steps ahead of a public sale of around 5 per cent of Aramco.

Based on the indicated US$2-trillion valuation that Saudi Aramco had hoped to achieve, a 1 per cent float would be worth US$20-billion, a huge milestone for the local stock market.

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Aramco’s flotation, which could be the world’s biggest IPO, is crucial to raise money for Crown Prince Mohammed bin Salman’s plans to diversify the Saudi economy away from oil revenues and has rapidly regained momentum over the past few days.

Saudi Energy Minister Prince Abdulaziz bin Salman said on Monday Saudi Arabia was aiming for the Aramco IPO “as soon as possible,” speaking on the issue for the first time since replacing Khalid al-Falih at the ministry.

The kingdom has geared up to fast-track the IPO by bringing in the head of Saudi Arabia’s sovereign wealth fund, Yassir al-Rumayyan, who was recently named Aramco chairman and leads an executive committee overseeing the plans.

Aramco is finalizing the list of banks that will manage the deal, with mandates expected in the coming days, sources said.

JPMorgan, Morgan Stanley and National Commercial Bank are expected to have lead roles and Citi, Goldman Sachs, HSBC and Samba Financial Bank will likely be added to the list of banks managing the transaction, one of the sources said.

Morgan Stanley, JPMorgan and HSBC were chosen to play a leading role before the process was halted last year.

Aramco, Goldman Sachs, HSBC, and JPMorgan declined to comment, while Citi, Samba, Morgan Stanley and National Commercial Bank did not respond to requests for comment.

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TIMING

Should Aramco’s local listing plans proceed, international banks would be tasked with promoting it to international investors looking to buy shares on the Saudi exchange Tadawul, the Middle East’s largest bourse.

Analysts and bankers say US$1.5-trillion rather than US$2-trillion is a more achievable valuation for Aramco.

The exact timing of the listing on Tadawul has not yet been decided, the sources said, although one added that it might be announced at a major annual investment conference in Riyadh scheduled for the end of October.

It is also not clear yet on which international exchange Aramco would list, but sources have told Reuters the board had determined that listing in New York would carry too many legal risks to make it a realistic option.

Aramco raised US$12-billion this year in its first international bond, gaining more than US$100-billion in demand.

Many saw that deal as a pre-IPO relationship-building exercise with international investors after repeated delays.

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The debt sale was expected to help fund Aramco’s $69.1 billion acquisition of a 70 per cent stake in petrochemicals firm Saudi Basic Industries Corp. from the Saudi sovereign wealth fund, a deal that many saw as a transfer of government funds aimed at boosting the Saudi Crown Prince’s economic agenda.

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