In new tax scheme, Saudi Aramco could be worth $1.4 trillion

Saudi Arabia’s move to reduce its state-run oil company’s tax rates could lift the value of Saudi Aramco by $1 trillion in its upcoming initial offering, Rystad Energy said Tuesday.

The Kingdom said earlier this week it would cut Saudi Aramco’s tax rate from 85 percent to 50 percent, giving future shareholders a larger take of the company’s profits. Saudi officials have said they plan to take 5 percent of the company public, likely in 2018.

The Norwegian consultancy pegged the potential stock-market value of Saudi Aramco at $1.4 trillion on Tuesday, up from the consultancy’s previous valuation of $400 billion – assuming oil prices average $75 a barrel in coming years. The oil giant’s revenue after costs “is around $3.4 trillion,” said Espen Erlingsen, a Rystad analyst, in a statement.

“With the old tax system, around 88 percent of the value went to the government through taxes and royalties,” Erlingsen said, “while with the new system around 60 percent of the profit goes to the government.”

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