Saudi Arabia's government has changed its relationship with the state-held oil and gas company Saudi Aramco and has limited the amount of time in which the group can explore and develop domestic resources to 40 years from a previous contract that gave the company access to them in perpetuity. However, there will be an option to renew the 40-year contract even though this legal move raises questions about Saudi Aramco's long-term production.
One of the main drivers behind the decision could be the delay behind the preparations for a stock market flotation (initial public offering or IPO) of Saudi Aramco. The new concession contract may have been agreed as part of the IPO process, which also included an overhaul of Saudi Aramco's financials and an audit of its reserves. Besides, this legal move is expected to formalize the relationship between the government and the company ahead of its opening up to foreign investors.
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