Today our strategy and petrochemical teams wrote a short note on the Aramco tax announcement. We discuss the implication of yesterday’s announcement that Saudi Aramco (which we assume has invested capital of well over SAR375bn (USD100bn)) will now pay tax at a rate of 50%. According to Amin Nasser, Aramco’s CEO, the company currently pays a royalty of 20% on revenues and a tax rate of 85%, so this would imply a sizeable reduction in the future tax take from Aramco (it is not clear if it will continue to pay a royalty of 20% on revenues, but it is reasonable to assume given the nature of Aramco’s asset base). The change in tax rates is part of the government’s preparations for Aramco’s IPO, first announced by Deputy Crown Prince Mohamed bin Salman in early 2016. Amin Nasser was quoted by Bloomberg in Jan 2017 as saying Aramco’s tax regime needed to be changed prior to listing. Officials have suggested that 5% of Aramco will be sold in 2017 or 2018 – we think that the timetable for EM upgrades for Saudi Arabia makes the later date more likely.