China 'offers to buy five percent of Saudi Aramco'

China offers to buy five percent direct state in Saudi Aramco
2 min read
16 October, 2017
Chinese state-owned oil companies are reportedly looking to directly purchase a five percent share in Saudi Aramco that the kingdom is considering listing as an IPO in 2018.
The kingdom is considering listing about 5 percent of Aramco in 2018 [AFP]
Chinese state-owned oil companies PetroChina and Sinopec have offered to buy a five percent share of Saudi Aramco directly, media has reported, following ongoing rumours next year's planned initial public offering (IPO) could be shelved.

The companies are part of a state-run consortium including China's sovereign wealth fund, sources told Reuters on Monday, and the deal could effectively mean cancelling the IPO altogether.

Saudi Arabia's Crown Prince Mohammed bin Salman said last year the kingdom was considering listing about five percent of Aramco in 2018 in a deal that could raise $100 billion for the country, if the company is valued at about $2 trillion as hoped.

"The Chinese want to secure oil supplies," one of the industry sources said. "They are willing to take the whole five percent, or even more, alone."

PetroChina and Sinopec declined to comment.

The IPO of Saudi Aramco is the part of an economic reform plan to diversify the Saudi economy beyond oil as the kingdom grapples with a tighter budget amid low oil prices.

But the IPO plan lacks widespread support, with some believing Riyadh is selling its prized Aramco to foreigners cheaply to counteract falling oil prices.

Disagreements between what some advisers recommend and what the crown prince wants have delayed decisions about the IPO, industry sources said.

Several options

Industry sources said the sale of a significant stake to Chinese firms was one of several options being considered. 

Two senior industry sources told Reuters Riyadh was keen on its biggest buyer of oil - China - becoming a "cornerstone investor" in Aramco, but no decision has yet been taken on whether to accept Beijing's offer.

But allowing China to buy five percent would effectively mean cancelling the IPO altogether, which is unlikely to happen, one of the sources said.

Delaying the listing further would also be the least preferred option, given the crown prince's determination to go ahead with the sale.

Sovereign wealth funds from South Korea, Japan and Russia - which are also major buyers of Saudi oil - were also interested in acquiring a stake in Aramco, sources told Reuters

A deal struck between Saudi Arabia and China could also include a reciprocal move by the Saudi company to invest in the Chinese refining industry, according to industry sources.