Saudi Arabia has postponed the Saudi Aramco initial public offering (IPO) to early 2021, Crown Prince Mohammed bin Salman al-Saud has said in an interview with Bloomberg News.

The crown prince said the Aramco IPO would take place in late 2020 or early 2021, one full year after the state energy giant fulfills its plan of acquiring a majority stake in petrochemicals major Saudi Basic Industries Corporation (Sabic).

Aramco is expected to complete the Sabic acquisition by mid-2019, Prince Mohammed has said.

“Everyone heard about the rumours of Saudi Arabia cancelling the IPO of Aramco, delaying that, and that this is delaying Vision 2030. This is not right. Actually, in mid-2017, we had an issue, which was: What's the future of Aramco?” he said.

Prince Mohammed also confirmed that Aramco will take over all of the 70 per cent Sabic stake held by state investment firm Public Investment Fund (PIF), putting to rest speculation about how much of Sabic Aramco was eyeing.

Sabic's remaining 30 per cent shares are traded publicly on the Riyadh Stock Exchange.

The deal would mean Aramco paying about $70-80bn to PIF for the Sabic stake, Prince Mohammed has said.

“Of course, the money coming from that deal will go to PIF, but we cannot IPO Aramco directly after that deal, because you need at least one full financial year before that IPO. So we believe that deal will happen in 2019, so you need the whole of 2020,” the Crown Prince said.

He affirmed that the Aramco IPO was “100 per cent” in the nation’s interest, and that Riyadh was committed to listing 5 per cent of the company, as originally planned.

With regards to the valuation of Aramco, Prince Mohammed said he expects Aramco would be “above $2tn” in value, although that would include Sabic’s worth.

Analysts have questioned the $2tn valuation of Aramco, saying the company would not be worth more than $1tn based on publicly available information.

The move to bring Sabic under Aramco’s fold is a carefully chalked out strategy by the government to guarantee the $2tn+ Aramco valuation that it is seeking, ensuring that a 5 per cent IPO of the company would now fetch at least the desired $100bn.

The money gained from the Aramco IPO would be channelled into the PIF as planned, although Aramco’s ownership would continue to be in the hands of the Saudi government, Prince Mohammed said.

Explaining the rationale behind the deal, the crown prince said: “So Aramco today produces oil, and it has a few downstream projects. But if we want to have a really strong future for Aramco after 20, 30, 40 years from today, Aramco has to invest a lot in downstream because we know that the new demand for oil 20 years from now will be from petrochemicals.”

He continued: “So when Aramco does that, it will have a huge conflict with Sabic, because Sabic is about petrochemicals and downstream. And the main source of oil for Sabic is from Aramco. So if Aramco does follow that strategy, Sabic will definitely suffer.”

“So before we do that, we have to have some sort of agreement to be sure that Aramco benefits from Sabic and Sabic doesn't suffer in that process.”

“So we've reached a point that PIF will sell the 70 per cent that it owns in Sabic to Aramco and Aramco will do the other jobs of merging — or whatever they will do with Sabic — to have one huge mega company in that area in Saudi Arabia and around the world.”

Aramco, being a “really low debt” company, combined with “good oil prices”, has the finances to make capital expenditures, Prince Mohammed said when asked how the oil behemoth would fund the acquisition of Sabic.

Aramco was recently reported to be considering tapping the international bond market for the first time to finance the acquisition of Sabic, according to a Bloomberg report.

“So they [Aramco] have a lot of tools to do the Sabic investment plus their other downstream strategy in the next 10 years,” he said.

On the question of Aramco’s international stock listing, the crown prince stopped short of mentioning which foreign stock market it is eyeing, saying only, “It will be the decision that helps the interest of the company, of IPOing Aramco.”