What Is Saudi Aramco? Its History, IPO, and Financials

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Saudi Aramco, officially the Saudi Arabian Oil Company, is the state-controlled national oil company of Saudi Arabia and the world’s largest oil producer. It is headquartered in Dhahran. It has traded publicly on the Saudi Exchange (Tadawul) since December 2019, but only a small slice of its shares has ever been sold to investors. The Saudi government holds the rest, and the government’s budget depends heavily on the company’s taxes, royalties and dividends.

What Is Saudi Aramco?

“Aramco” originally stood for Arabian American Oil Company, the name the venture took in the 1940s when American oil companies ran it. The modern legal name, Saudi Arabian Oil Company, dates from 1988, after the Saudi state had taken full ownership. The company explores for, produces, refines and sells crude oil, natural gas and related products, and it manages the bulk of the kingdom’s hydrocarbon reserves.

For decades Aramco was one of the most secretive large companies in the world. That changed in April 2019, when credit rating agencies published details of its finances ahead of its first international bond sale, which raised $12 billion. The prospectus showed net income of about $111 billion for 2018, more than Apple earned that year, which made Aramco the most profitable company in the world on that measure.

Leadership sits with Amin H. Nasser, president and chief executive officer, who also serves on the board of directors. The board is chaired by Yasir Othman Al-Rumayyan.

History of Saudi Aramco

The concession years (1933 to 1972)

In 1933 the Saudi government signed a concession agreement with Standard Oil Company of California, giving the American firm rights to explore for oil in the kingdom. Drilling began soon afterward, and the first commercial oil production came in 1938. Over the following decade output grew quickly, reaching 500,000 barrels per day in 1949.

Moving that oil to export markets required infrastructure on a large scale. The company built the Trans-Arabian Pipeline (Tapline), which at the time was the longest pipeline in the world, to carry crude toward the Mediterranean.

Nationalization (1973 to 1988)

The balance of control shifted in the 1970s. The Saudi government acquired a 25% interest in 1973 and raised its stake in steps through the rest of the decade, reaching 100% ownership by 1980. The company was formally established as the Saudi Arabian Oil Company in 1988.

Becoming an integrated energy company (1989 onward)

Nationalization left Aramco as a producer and exporter of crude. To capture more of the value chain, it formed a joint venture with Texaco in the United States in 1989, the start of its shift toward an integrated petroleum company that also refines and markets fuels. Through the 1990s it added international alliances and partnerships.

By 2017 Aramco had become the sole owner of the Port Arthur refinery in Texas, the largest single-site crude oil refinery in North America. It has also invested heavily in research and development, including nonmetallic materials and crude-to-chemicals technology, which converts crude oil directly into chemical feedstocks rather than mainly into fuels. In 2020 it acquired a 70% stake in the petrochemical maker SABIC, which greatly expanded its chemicals business.

Saudi Aramco’s IPO

The idea of selling shares in Aramco became public in 2016, when Crown Prince Mohammed bin Salman announced plans to list 5% of the company at a valuation of roughly $2 trillion. The listing was part of a broader plan to diversify the Saudi economy away from oil, with offering proceeds intended to fund that effort.

The plan stalled for several years. Some analysts argued that Aramco’s real value was well below $2 trillion. Investor sentiment was also clouded by allegations that the crown prince was behind the 2018 killing of journalist Jamal Khashoggi.

When the IPO finally went ahead in December 2019, it was smaller than first announced and listed only on the domestic exchange:

• Shares sold: 3 billion, about 1.5% of the company, at 32 riyals each
• Proceeds: $25.6 billion, the largest IPO ever at the time
• Overallotment (greenshoe): 450 million additional shares, raising the total to $29.4 billion

The offering price implied a valuation of about $1.7 trillion. That figure follows from the deal’s own numbers: $25.6 billion for 1.5% of the company works out to roughly $1.7 trillion for 100%. It was still short of the crown prince’s $2 trillion target. Aramco’s market capitalization has since moved with its share price, so the IPO valuation is a historical marker rather than a current measure of what the company is worth.

The float is unusually small for a company of this size. Apple insiders, by comparison, hold only about 0.10% of Apple’s shares, with nearly all the rest in public hands. At Aramco the proportions are reversed, and the state remains in control.

Business Model

Aramco earns money by producing hydrocarbons in Saudi Arabia and selling them, either as raw crude and gas or as refined fuels and chemicals. Its integration means it captures margins at several stages: extraction, refining, petrochemical production and marketing.

Revenue Segments

The company reports its operations in two main segments:

• Upstream: exploration, development and production of crude oil, natural gas liquids and natural gas. This is where the scale of Saudi reserves matters most, and it generates the bulk of the company’s profit.
• Downstream: refining, petrochemicals (including SABIC), distribution, marketing and trading. Assets such as the Port Arthur refinery and the US joint ventures that grew out of the Texaco deal sit here.

Because upstream earnings depend on crude prices and on production volumes that Saudi Arabia coordinates with other producers, Aramco’s profits swing with the oil market more than its size alone might suggest.

Major Shareholders and the Saudi State

Answering “who owns Aramco” is simple at the top level: the Kingdom of Saudi Arabia. After the IPO, about 1.5% of the shares were in public hands and the government held the remaining 98.5%. The overallotment added 450 million more shares to the float, but the state’s position as controlling shareholder did not change.

The financial link between company and state runs through three channels:

1. Income tax. Aramco pays a 50% income tax rate to the government. Before 2017 the rate was 85%. The reduction made the company’s earnings more attractive to outside investors ahead of the IPO.
2. Royalties on the oil it produces.
3. Dividends, most of which flow to the state as the dominant shareholder.

That dependence shapes how lenders view the company. Moody’s rated Aramco A1, a rating it linked directly to the company’s credit ties with the Saudi government, and one lower than a company with Aramco’s earnings might otherwise expect. Moody’s noted that Aramco had a clear record of being run as a commercially independent company, but that the government budget relied heavily on its royalties, taxes and dividends. In practice, the company’s credit standing cannot be separated from the kingdom’s.

There is no US government ownership. The American connection is historical: Standard Oil of California and other US firms built and ran the company before nationalization, which is where the “American” in the original name came from.

Saudi Aramco’s Financials

Before 2019, Aramco’s finances were essentially private. The bond prospectus published that April was the first detailed public look at the company’s accounts.

Net income figures by year show how closely results track the oil market:

The 2020 drop reflected the COVID-19 pandemic, which cut fuel demand and made energy prices volatile. Results improved in the second half of that year as demand recovered. Even so, Aramco held up better than many peers. Royal Dutch Shell, for example, reported a 2020 profit of $4.85 billion, down from $16.5 billion in 2019.

Earnings rebounded strongly once the pandemic passed. In 2024 Aramco paid dividends totaling $124.25 billion, 27% more than the year before. That payout was larger than 2024 net income of $106.25 billion. Dividends above earnings have to be funded from cash on hand or borrowing, which matters for anyone judging how sustainable a given payout level is.

Reserves: How Much Oil Aramco Controls

At the end of 2020, Aramco reported total reserves of 255.2 billion barrels of oil equivalent, made up of:

• 198.8 billion barrels of crude oil and condensate
• 25.2 billion barrels of natural gas liquids
• 191.6 trillion standard cubic feet of natural gas

Exxon Mobil, the largest US oil company, reported about 15 billion barrels of oil and gas reserves at the end of 2020. More recent tallies put Aramco’s crude reserves alone at about 261.1 billion barrels, roughly 10 times Exxon Mobil’s. These reserves are the base of Aramco’s business: they let it produce at very large volumes for decades, and they are the main reason it ranks as the largest oil and gas company in the world by market capitalization, well ahead of Exxon Mobil and Chevron.

FAQs

The Bottom Line

Saudi Aramco matters to anyone following oil markets, Saudi public finances or the shares traded on the Saudi Exchange. Outside investors own a small float in a company the Saudi government controls and relies on for taxes, royalties and dividends, so its credit standing tracks the kingdom's. Profits rise and fall with crude prices and coordinated output, and the 2024 dividend exceeded net income, so payout levels deserve scrutiny against earnings.