* Crown Prince has stuck to $2 trillion value for Aramco -sources
* Banks puts Aramco value at $1.3-$1.7 trillion - sources
* Aramco board scheduled to meet this week - source
By Alex Lawler, Marwa Rashad and Saeed Azhar
LONDON/RIYADH/DUBAI, Aug 7 (Reuters) - Saudi Crown PrinceMohammed Bin Salman is insisting on a $2 trillion valuation ofoil firm Aramco, even though some bankers and company insiderssay the kingdom should trim its target to around $1.5 trillion,industry and banking sources said.
With Aramco talking again to banks about an initial publicoffering (IPO), its board is meeting later this week and willprobably hold a discussion about the company's value, a sourceclose to the company said.
Saudi Aramco declined to comment. CIC, the Saudi governmentmedia office, did not respond to a Reuters request for comment.
Prince Mohammed put a $2 trillion valuation on the statecompany in early 2016 when he first proposed a share sale todiversify Saudi Arabia's economy beyond oil.
He has stuck with that valuation, according to the sourceclose to Aramco and another source familiar with the IPO plans,even though some banks think it will be a struggle. Over thepast three years, countries have accelerated efforts to shiftaway from fossil fuels to curb global warming, putting oilprices under pressure.
A valuation gap could hinder any share sale.
"If the market didn't value Aramco properly, there is norush to IPO, they can always postpone," the source familiar withthe plans said.
"They have the right tools to manoeuvre and aren't in a weakposition to IPO Aramco unless with a valuation that achieves theobjectives of the vision and the national interest."
Even at the lower end of estimated valuations, an Aramco IPOwould create the world's largest public company. It would alsobring unprecedented scrutiny on the kingdom. Months after thelisting was shelved, Saudi Arabia came under Western pressureover the murder of journalist Jamal Khashoggi in the Saudiconsulate in Istanbul.
The initial plan to sell a 5 percent stake in Aramco wasmeant to raise funds for Saudi Arabia's sovereign wealth fund toinvest in non-oil sectors. When the IPO was shelved, the wealthfund sold a majority stake in petrochemicals company Saudi BasicIndustries Corp (SABIC) to Aramco for $69 billioninstead.
After the SABIC acquisition was announced, Saudi Aramcoissued its first international bonds in April. The success ofthat debt sale, which attracted more than $100 billion in ordersfor a $12 billion issue, showed that pressure on the kingdomover the Khashoggi killing had subsided. Talks about a sharesale were revived shortly after.
OIL PRICES
This year's bond sale forced Aramco to disclose itsfinancials, revealing a colossal net income of $111 billion,over a third bigger than the combined net income of the fivesuper majors Exxon Mobil, Royal Dutch/Shell,BP, Chevron and Total.
Even with such profits, one bank pitching for a role in arenewed listing plan has put Aramco's value at $1.4-$1.5trillion including SABIC, a source familiar with the mattersaid. The source close to Aramco described that as a morerealistic valuation.
Oil and gas companies are struggling to attract investorinterest due to a weaker outlook for oil and deepening climateactivism. The S&P Energy sector is up 2 percent so farthis year, underperforming the broader market which is 15percent higher.
Even at $1.5 trillion, Aramco would be worth at least 50percent more than the world's most valuable companies -Microsoft with around $1 trillion, Apple and Amazon at around$900 billion each.
A key factor in an oil company's value is the expected oilprice. Producers including Saudi Arabia, its OPEC colleagues andnon-members like Russia have struggled to prop up the marketthis year by a supply-limiting pact, due to slowing demand andrising supplies from the United States and other producers.
Brent crude is trading at $59 a barrel, down fromthe $70-$80 that OPEC and industry sources have said SaudiArabia favours.
"If you are absolutely sure of a high oil price it's easierto have a high valuation, but prices are not that high and avery high oil price is not sustainable," said the source closeto Aramco.
"Also, a lot depends on the integration of SABIC and howconvincing that story is."
Before the IPO was put on hold, banks estimated Aramco'svalue at $1.3 to $1.7 trillion, the source close to Aramco said.
Another person, a source with an international bank, saidbanks' estimates at that time were around $1.5 trillion with$1.7 trillion at the top.
Saudi Aramco pumps about one in every 10 barrels of oilproduced in the world and sees the downstream - oil refining andpetrochemicals - as increasingly important to boost the profitit makes on each barrel. With the purchase of SABIC, it aims tobecome a global leader in chemicals, helping to diversify itsrevenues.
The source with the international bank said efforts remainedfocused on achieving the $2 trillion value, and a second sourceclose to Aramco said the company has been working on ways toboost its own value independently of the oil price.
"They are looking at things like internal governance and howto extract value," this second source said. "If they structurethe SABIC integration properly, it will increase the value ofthe company."(Additional reporting by Rania El Gamal and Davide Barbuscia;Editing by Carmel Crimmins)
BP (BP.)
