Climate change could push Aramco IPO value down: report

The value of Saudi Aramco could be 25 percent to 40 percent lower than the estimated $1.5-$1 billion on oil price risk due to climate change, said a report published by Oil Change International.

The research organization also said that, if oil prices remained in the $50/barrel range, the oil giant’s value could be further reduced by 55 percent, reaching less than $700 billion.

However, the report did not include Aramco’s refining, petrochemicals, overseas, and non-hydrocarbon operations, together worth an estimated $100 billion.

Following the Paris Climate Agreement, current efforts to decarbonize the energy sector could have an impact on investors’ attitudes towards Aramco’s IPO. According to experts the next decade could see a transition to renewables, putting fossil fuel investors at a high risk exposure due to both the declining reserves and prices of oil and gas.

One of the most disruptive changes so far is the penetration of the electric car. Another factor is the changing regulations pushing down oil prices, an element that Aramco’s value is strongly dependent on.

Countries like France and the United Kingdom have already announced that petrol- and diesel-fueled cars will be banned by 2040. Other European countries are considering a ban earlier by 2025. The Indian government is also aiming to achieve 100 percent electric cars sales by 2030.