Dubai: Saudi Arabian Oil Co. set final pricing for its debut Islamic bond as the company presses ahead with plans to raise $10 billion (Dh36 billion) in debt, according to a person with knowledge of the matter.

Aramco, as the world’s largest oil producer is known, is selling debt with a seven-year tenure in a private placement at 25 basis points over the country’s interbank offered rate, the person said, asking not to be identified as the information is private. The company is seeking to raise about $2 billion in its debut sale of Islamic bonds under a 37.5 billion-riyal ($10 billion) sukuk programme, people with knowledge of the matter said this month.

The oil giant is selling debt ahead of an initial public offering in 2018 as the country’s finance ministry plans to cut taxation on the company, potentially raising its valuation to more than $1 trillion, according to estimates by Sanford C. Bernstein & Co. The cut will boost Aramco’s net income by 300 per cent, putting per-barrel income in a range similar to that of international oil companies including Exxon Mobil Corp., Bernstein analysts said.

Rystad Energy AS, an Oslo-based consulting company, increased its valuation of Aramco by 250 per cent to $1.4 trillion, assuming a long-term oil price of $75 a barrel. Brent crude, the global benchmark, rose 0.4 per cent to $51.55 a barrel by 10.01am in London.

Alinma Investment Co., GIB Capital, HSBC Holdings Plc, NCB Capital, Riyad Capital, Samba Capital and Saudi Fransi Capital are arranging the hybrid riyal Islamic bond, which is expected to close on April 3, the person said.

Saudi issue

Aramco’s sukuk follows Saudi Arabia’s $17.5 billion bond issue in October, which was the state’s debut international debt sale, as well as the biggest-ever dollar bond from an emerging-market issuer.

Saudi Arabia is also said to be planning a sale of riyal-denominated Islamic bonds to local institutions to help boost the country’s Islamic bond market. Six sukuk issues in the nation raised $1.8 billion in 2016, with five of them denominated in riyals, according to data compiled by Bloomberg. The United Arab Emirates, the second-biggest Arab economy, raised $7.8 billion from 14 sukuk sales last year.

The Saudi government announced Monday that it’s reducing Aramco’s tax rate to 50 per cent from 85 per cent, as it prepares to offer investors as much as 5 per cent of the world’s biggest oil exporter in what could be a record IPO. Estimates of Aramco’s potential valuation vary widely. Deputy Crown Prince Mohammed Bin Salman has said it’s worth about $2 trillion. Before the tax change, consultant Wood Mackenzie Ltd. valued the company at around $400 billion, according to clients who attended a private briefing earlier this year.