Riyadh: Saudi Arabia is getting ready for the twilight of the oil age by creating the world’s largest sovereign wealth fund for the kingdom’s most prized assets.

Deputy Crown Prince Mohammad Bin Salman laid out his vision for the Public Investment Fund, which will eventually control more than $2 trillion (around Dh7.35 trillion) and help wean the kingdom off oil.

As part of that strategy, the prince said Saudi Arabia will sell shares in Aramco’s parent company and transform the oil giant into an industrial conglomerate. The initial public offering could happen as soon as next year, with the country currently planning to sell less than 5 per cent.

“IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” the prince said in an interview.

“What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”

Almost eight decades since the first Saudi oil was discovered, King Salman’s 30-year-old son is aiming to transform the world’s biggest crude exporter into an economy fit for the next era.  

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As his strategy takes shape, the speed of change may shock a conservative society accustomed to decades of government handouts.

The sale of Aramco, or Saudi Arabian Oil Co., is planned for 2018 or even a year earlier, according to the prince. The fund will then play a major role in the economy, investing at home and abroad. It would be big enough to buy Apple Inc., Google parent Alphabet Inc., Microsoft Corp. and Berkshire Hathaway Inc. — the world’s four largest publicly traded companies.

PIF ultimately plans to increase the proportion of foreign investments to 50 per cent of the fund by 2020 from 5 per cent now, said Yasir Al Rumayyan, secretary-general of the fund’s board.

The blueprint for structural change follows a series of measures last year to curb spending and prevent the budget deficit from exceeding 15 per cent of gross domestic product. At the end of December, authorities raised the prices of fuel and electricity and pledged to end wasteful budget spending after oil prices plunged.

More will follow those “quick fixes” as part of a “National Transformation Plan” to be announced within a month, including steps to raise non-oil revenue steadily through various measures including fees and value-added taxes.

“We are working on increasing the efficiency of spending,” said Prince Mohammad.

The government used to spend up to 40 per cent more than allocated in its budget and that was whittled to 12 per cent in 2015, he said. “So I don’t believe that we have a real problem when it comes to low oil prices.”

As defence minister, Prince Mohammad leads the military effort. He also oversees ministries including finance, oil and the economy through the Council for Economic and Development Affairs. The council, which was established after his father became king, also controls the Public Investment Fund.

Prince Mohammad said the wealth fund already holds stakes in companies including Saudi Basic Industries Corp., the world’s second-biggest chemicals manufacturer, and National Commercial Bank, the kingdom’s largest lender.

The fund is looking at “two opportunities outside Saudi Arabia” in the financial industry, the prince said, declining to name the possible acquisition targets. “I believe that we will conclude at least one of them.”

It has already started to become more active abroad. In July, PIF acquired a 38 per cent stake in South Korea’s Posco Engineering & Construction Co. for $1.1 billion and the same month agreed to a $10 billion partnership to invest in Russia with the Russian Direct Investment Fund.

The fund has been hiring specialists for markets, private equity and risk management, said Al Rumayyan, PIF’s secretary-general and a former chief of Credit Agricole SA-backed Saudi Fransi Capital.

“We’re working now on different fronts,” he said. “Now the government is transferring some of its assets, lands, some of the companies to us. We have different projects in tourism and in new industries that are untapped in Saudi.”

The prince described the overseas investment plan as “very aggressive,” though said PIF would initially be skewed towards domestic assets by the addition of Aramco.

“Undoubtedly, it will be the largest fund on Earth,” the prince said. “This will happen as soon as Aramco goes public.”