By Maha El Dahan, Hadeel Al Sayegh and Yousef Saba

DUBAI, May 31 (Reuters) - Saudi Arabia and its bankers

will on Sunday morning start taking orders for as much as $13.1

billion worth of shares in its energy giant Aramco, in

a major test of international investor interest in its market.

In a long-anticipated announcement on Thursday, the kingdom

and Aramco detailed plans to sell up to a 0.7% in the

state-controlled oil company, with 10% of the offering reserved

for retail investors, based on demand. Order-taking will run

through June 6 and the deal will price on June 7.

The offering - codenamed Project Bond according to sources -

has been trailed for months as a key step in diversifying the

company's investor base since its record-breaking initial public

offering (IPO) in 2019, as well as for its potential to further

fuel the kingdom's massive economic diversification programme.

It also marks a test of interest in Saudi markets after

lukewarm interest from international investors in the 2019

flotation amid concerns about a high valuation, Saudi government

control and the energy transition away from hydrocarbons.

International investors have been similarly reticent about

the kingdom's mega-projects, from beach resorts to new cities.

Investors buying into Aramco will need to weigh

environmental concerns against its rich payouts.

"Since the IPO, higher expectations on dividend payout and

oil price have outweighed lower expectations on output," said

Hasnain Malik, head of equity research, at Dubai-based Tellimer.

"That improvement in the cash flow available for

shareholders may not be enough to entice those foreign investors

that did not participate in the IPO because of environmental

concern on fossil fuels or governance concern on the priorities

of the dominant sovereign shareholder."

When asked about whether there had been any interest from

so-called anchor investors to take a major chunk of the

offering, Aramco Chief Financial Officer Ziad Al-Murshed gave

little away.

He noted the shares are on sale above the IPO price - within

a range of 26.7 riyals ($7.12) to 29 riyals, after they closed

at 29.1 riyals on Thursday, valuing the company at $1.87

trillion. Aramco's IPO valued it at $1.7 trillion.

The sale comes as stock offerings globally have reached

$247.4 billion in the year to date, the highest level since

2021, according to Dealogic data. It will be one of the biggest

share sales in the last decade.

'SELF-FUNDING'

Saudi Arabia's de facto ruler Crown Prince Mohammed bin

Salman, known as MbS, has poured hundreds of billions of dollars

through the kingdom's sovereign Public Investment Fund (PIF)

into massive projects, and everything from electric vehicles to

sports and a new airline, to diversify the economy away from

hydrocarbons and create jobs.

Selling Aramco shares is "not the only way to fund (MbS')

Vision 2030, but it's one of the easier options now that it's

clear foreign investors aren't interested in buying stakes in

Saudi gigaprojects," said Jim Krane Research fellow, Rice

University's Baker Institute Houston.

"The Saudis have not been able to attract enough foreign

investment to cover much of the cost of building the Vision 2030

gigaprojects, like the massive beach resorts and futuristic

cities. It's not for lack of trying."

Krane expects most of the buyers of the offering will be

Saudis. "So, it's an indirect form of self-funding by Saudi

investors who receive shares of Saudi Aramco instead of a piece

of Neom or the New Murabba," he said, referring to two of the

mammoth projects being spearheaded by the PIF.

Selling on the Saudi Exchange also offers lighter regulatory

and transparency requirements, he added.

The kingdom is supported by a familiar phalanx of advisers,

as for the Aramco IPO. Wall Street dealmaker Michael Klein's

firm Klein & Co and U.S. boutique firm Moelis & Co ( MC ) are acting as

independent advisers on the deal, according to a filing with the

Saudi Exchange Thursday.

Saudi National Bank's investment banking arm SNB Capital is

acting as lead manager in addition to its role as joint global

coordinator alongside Morgan Stanley ( MS ), Citi, Goldman Sachs ( GS ), HSBC,

Bank of America and JPMorgan ( JPM ).

Aramco CEO Amin Nasser told reporters the sale was an

opportunity for current and new investors to build a sizeable

position in the company, and for Aramco to broaden its

shareholder base and boost the liquidity of its shares.

($1 = 3.7506 riyals)