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Saudi Arabia has transferred a $163bn stake in national oil group Aramco to its sovereign wealth fund as the once conservative state investment group seeks to grow its assets to fund projects to modernise the economy.
The transfer of 8 per cent of Aramco to the Public Investment Fund is the third time in the past two years the government has increased the sovereign wealth fund’s stake in the world’s largest oil producer.
The PIF now in effect controls 16 per cent of Aramco after an original 4 per cent stake was transferred to the fund in February 2022 before Sanabil, an investment arm of the wealth fund, took a 4 per cent stake in April 2023.
After decades as a conservative sovereign investor mainly focused on the local market, Crown Prince Mohammed bin Salman has made the PIF the vehicle for investments under his Vision 2030 strategy, which seeks to modernise the kingdom and reduce its reliance on oil.
MBS, as he is widely known, who is the country’s prime minister and also chairs the wealth fund, said the transfer would “solidify PIF’s strong financial position and credit rating”.
The transaction was “a continuation of Saudi Arabia’s long-term initiatives to boost and diversify the national economy and expand investment opportunities in line with Saudi Vision 2030”, he added.
Aramco described the transaction as a “private transfer” that would have no an impact on its operations, strategy or dividends distribution policy.
The state-owned group sold a 1.7 per cent stake on the Saudi stock market in 2019, raising about $29bn in a blockbuster initial public offering.
After the latest transfer, the state’s direct stake in the company will drop to 82 per cent, according to the statement by the Saudi Press Agency on Thursday.
In 2022, Aramco made record profits of $161bn as energy prices soared and its quarterly dividend payments remains the most important single source of revenue for the Saudi government. The company will report its 2023 financial results on Sunday.
The PIF, which had about $700bn in assets under management before the latest transfer, has a target of managing $1tn in assets by 2025 and the larger stake in Aramco will provide it with substantial dividends to fund its expansion.
The PIF has become a key source of investments for international financiers looking to raise capital from tech start-ups to football clubs.
Yasir Al-Rumayyan, governor of the PIF who has risen to become one of the most powerful non-royals in the kingdom, has been given the task of spearheading its expansion.
He is also chair of Aramco and English football club Newcastle United, one of the PIF’s most high-profile overseas investments.
