25 ms·

Saudi Aramco is essentially part of the Saudi government, not an apples to apples comparison IMO. If they're going to discount the free mineral rights given to

by tmh79 8y ago

Saudi Aramco is essentially part of the Saudi government, not an apples to apples comparison IMO. If they're going to discount the free mineral rights given to Aramco, then they should also account for the social services that the government uses Aramco to pay for, because without the social services, you're not getting free mineral rights.

ip26 8y ago
We sell mineral rights in the US for next to nothing, so is it really exceptional?
- onetimemanytime 8y ago
  So if oil is found in Fed land in Alaska, Exxon will get to pump it for "next to nothing"? No special taxes, per barrel fee?
  - ip26 8y ago
    It's not actually free, but my vague memory is that most fees are something like 20% of the going market rate on private land.
  - r00fus 8y ago
    Alaska has a profit sharing deal with its residents so they always get some cash for the exploitation of lands. The rest of the US is a different story.
    - planteen 8y ago
      Wyoming has mineral severance taxes to the point that there is no income tax in the state. Over 50% of the state's revenue comes from mineral severance. There is also a permanent trust there. Colorado gets something like $100 million per year from mineral severance. I'd be shocked if other oil producing states didn't collect severance taxes. What state are you referring to that doesn't collect anything?
      - selectodude 8y ago
        Ironically, there's only one state without a mineral severance tax, and it's California.
        planteen 8y ago
        Wow, today I learned something. I am shocked that deep red states (Alaska, Wyoming, Texas) tax something that a deep blue state (California) does not.
  - exothermic 8y ago
    Land acquisition costs are very low in the US (this is done through a competitive bidding process when new tracts are offered). Royalties to the government are in the 20-30% range on a revenue basis, plus standard CIT. This is for new land for exploration- e.g. no proven reserves at the time of the sale. If there are known reserves, then the price would be much higher but the government is not typically in the business of proving reserves themselves.
    - zaroth 8y ago
      I seem to recall reading government reports about proven reserves. I thought we had a geological department that investigated all sorts of mineral / oil / natural gas resources.
      - planteen 8y ago
        Yes, there are tons of geologic maps produced by the government that are used by oil & gas companies. Most states require data from well logs to be reported too. I think what parent is possibly talking about is when the BLM puts up tracts for mineral lease auction that nobody wants (no economically recoverable reserves). https://www.eenews.net/stories/1060099219 https://www.eenews.net/stories/1060099219
    - mtnGoat 8y ago
      coal is at 12%(on BLM land), depending on who you lease from, Gold can be under 1%. What is as high as 20-30?
      - exothermic 7y ago
        You are right- I am thinking of the typical royalties paid to private land owners onshore (either 1/8th or 1/4th). Offshore federal royalties are typically ~12.5-18.5% [1] [1] https://www.boem.gov/note07062017/ https://www.boem.gov/note07062017/
gaogao 8y ago
>> apples to apples comparison I really enjoy this in the context of comparing to Apple
gimmeThaBeet 8y ago
I guess it depends on which numbers you're using. The $111 billion quoted number for net income does not include the $55.6 billion in royalties to the Kingdom that Aramco records as an expense. Yes, the royal family is the only shareholder and the government, so it's splitting hairs in the sense they're getting the money from those mineral rights, on the other hand its even more money. But if they sold the whole kit and kaboodle last year, whoever owned it would make $111B and the Kingdom would get $55.6B.
- rhizome 8y ago
  That sounds like an arrangement very similar to Venezuela's oil industry, except with a level of personal enrichment far beyond the structure of Venezuela's industry, which has enjoyed constant opprobrium as the work of a dictator.
forkLding 8y ago
Nationalized, crown or state-owned corporations are still corporations. The fact that they get large govt. subsidies or discounts (if they do, some don't) is part of the deal. Nationalized corporations also have their downsides like frequent government/bureaucratic interventions that make no business sense and having to fork a lot of revenue for governmental purposes when needed. You can find a lot of nationalized corporations that don't do so well or are essentially failing. As quoted: “Aramco is wholly-owned by the state and is expected to remain largely under government ownership even after any potential IPO in the future,” Akbar added. “While there is a clear track record of Aramco having been run as a commercially independent company, the government’s budget is highly reliant upon contributions from Aramco in the form of royalties, taxes and dividends.” in below article: https://www.cnbc.com/2019/04/01/saudi-aramco-made-111-billion-in-2018-topping-apple-as-the-worlds-most-profitable-company-by-far.html https://www.cnbc.com/2019/04/01/saudi-aramco-made-111-billio...
- Not_a_pizza 8y ago
  You might as well label the Fed a corporation officially then, and do a real compare and contrast.
  - GCA10 8y ago
    If I'm reading this correctly, the Fed and its member banks had $49 billion of net income through the first nine months of 2018, before remittances to the U.S. Treasury. https://www.federalreserve.gov/aboutthefed/2018-september-federal-reserve-banks-combined-quarterly-financial-report-unaudited.htm https://www.federalreserve.gov/aboutthefed/2018-september-fe... Very nice showing. If you annualize the Fed's nine-month rate, it's probably slightly ahead of Apple's money-making rate, which is the best in the U.S. corporate sector. (Apple reported $59 billion in net income for the full year ended Sept. 29, 2018.) Even so, the Fed can't quite crank out profits at an Aramco tempo.
    - Not_a_pizza 8y ago
      The Fed is effectively pulling money out of thin air, and profit sharing with it's largest partners - big banks, something which Saudi Aramco is both unable and unwilling to accomplish.
nathan_long 8y ago
> not an apples to apples comparison IMO I see what you did there.

by tmh79 8y ago

ip26 8y ago

We sell mineral rights in the US for next to nothing, so is it really exceptional?

onetimemanytime 8y ago
So if oil is found in Fed land in Alaska, Exxon will get to pump it for "next to nothing"? No special taxes, per barrel fee?
- ip26 8y ago
  It's not actually free, but my vague memory is that most fees are something like 20% of the going market rate on private land.
- r00fus 8y ago
  Alaska has a profit sharing deal with its residents so they always get some cash for the exploitation of lands. The rest of the US is a different story.
  - planteen 8y ago
    Wyoming has mineral severance taxes to the point that there is no income tax in the state. Over 50% of the state's revenue comes from mineral severance. There is also a permanent trust there. Colorado gets something like $100 million per year from mineral severance. I'd be shocked if other oil producing states didn't collect severance taxes. What state are you referring to that doesn't collect anything?
    - selectodude 8y ago
      Ironically, there's only one state without a mineral severance tax, and it's California.
      - planteen 8y ago
        Wow, today I learned something. I am shocked that deep red states (Alaska, Wyoming, Texas) tax something that a deep blue state (California) does not.
- exothermic 8y ago
  Land acquisition costs are very low in the US (this is done through a competitive bidding process when new tracts are offered). Royalties to the government are in the 20-30% range on a revenue basis, plus standard CIT. This is for new land for exploration- e.g. no proven reserves at the time of the sale. If there are known reserves, then the price would be much higher but the government is not typically in the business of proving reserves themselves.
  - zaroth 8y ago
    I seem to recall reading government reports about proven reserves. I thought we had a geological department that investigated all sorts of mineral / oil / natural gas resources.
    - planteen 8y ago
      Yes, there are tons of geologic maps produced by the government that are used by oil & gas companies. Most states require data from well logs to be reported too. I think what parent is possibly talking about is when the BLM puts up tracts for mineral lease auction that nobody wants (no economically recoverable reserves). https://www.eenews.net/stories/1060099219 https://www.eenews.net/stories/1060099219
  - mtnGoat 8y ago
    coal is at 12%(on BLM land), depending on who you lease from, Gold can be under 1%. What is as high as 20-30?
    - exothermic 7y ago
      You are right- I am thinking of the typical royalties paid to private land owners onshore (either 1/8th or 1/4th). Offshore federal royalties are typically ~12.5-18.5% [1] [1] https://www.boem.gov/note07062017/ https://www.boem.gov/note07062017/

gaogao 8y ago

>> apples to apples comparison I really enjoy this in the context of comparing to Apple

gimmeThaBeet 8y ago

I guess it depends on which numbers you're using. The $111 billion quoted number for net income does not include the $55.6 billion in royalties to the Kingdom that Aramco records as an expense. Yes, the royal family is the only shareholder and the government, so it's splitting hairs in the sense they're getting the money from those mineral rights, on the other hand its even more money. But if they sold the whole kit and kaboodle last year, whoever owned it would make $111B and the Kingdom would get $55.6B.

rhizome 8y ago
That sounds like an arrangement very similar to Venezuela's oil industry, except with a level of personal enrichment far beyond the structure of Venezuela's industry, which has enjoyed constant opprobrium as the work of a dictator.

forkLding 8y ago

Nationalized, crown or state-owned corporations are still corporations. The fact that they get large govt. subsidies or discounts (if they do, some don't) is part of the deal. Nationalized corporations also have their downsides like frequent government/bureaucratic interventions that make no business sense and having to fork a lot of revenue for governmental purposes when needed. You can find a lot of nationalized corporations that don't do so well or are essentially failing. As quoted: “Aramco is wholly-owned by the state and is expected to remain largely under government ownership even after any potential IPO in the future,” Akbar added. “While there is a clear track record of Aramco having been run as a commercially independent company, the government’s budget is highly reliant upon contributions from Aramco in the form of royalties, taxes and dividends.” in below article: https://www.cnbc.com/2019/04/01/saudi-aramco-made-111-billion-in-2018-topping-apple-as-the-worlds-most-profitable-company-by-far.html https://www.cnbc.com/2019/04/01/saudi-aramco-made-111-billio...

Not_a_pizza 8y ago
You might as well label the Fed a corporation officially then, and do a real compare and contrast.
- GCA10 8y ago
  If I'm reading this correctly, the Fed and its member banks had $49 billion of net income through the first nine months of 2018, before remittances to the U.S. Treasury. https://www.federalreserve.gov/aboutthefed/2018-september-federal-reserve-banks-combined-quarterly-financial-report-unaudited.htm https://www.federalreserve.gov/aboutthefed/2018-september-fe... Very nice showing. If you annualize the Fed's nine-month rate, it's probably slightly ahead of Apple's money-making rate, which is the best in the U.S. corporate sector. (Apple reported $59 billion in net income for the full year ended Sept. 29, 2018.) Even so, the Fed can't quite crank out profits at an Aramco tempo.
  - Not_a_pizza 8y ago
    The Fed is effectively pulling money out of thin air, and profit sharing with it's largest partners - big banks, something which Saudi Aramco is both unable and unwilling to accomplish.

nathan_long 8y ago

> not an apples to apples comparison IMO I see what you did there.