China to buy 5% of Saudi oil and gas company Saudi Aramco

Almaty. October 18. Silkroadnews – China intends to buy 5% of Saudi oil and gas company Saudi Aramco, the Asahi Shimbun newspaper reported.
“China is offering to buy up to 5 percent of Saudi Aramco directly, sources said, a move that could give Saudi Arabia the flexibility to consider various options for its plan to float the world’s biggest oil producer on the stock market,” the report said.
Recently the Chinese state oil companies PetroChina and Sinopec wrote a letter to Saudi Aramco senior officials to express their interest in a direct deal.
Mohamed bin Salman, Crown Prince of Saudi Arabia, said last year the kingdom was considering listing about 5% of Aramco’s shares in 2018, which could raise $100 billion if the company is valued at about $2 trillion.
The initial public offering (IPO) of Saudi Aramco is a central element of the economic reform plan aimed at diversifying the Saudi economy beyond the oil and gas sector. In addition, it can significantly improve the budget of the kingdom affected by low oil prices.
However, the IPO plan aroused public fears that Riyadh could sell a valuable resource too cheaply under low oil prices. The internal disagreement between the recommendations of some advisors and the crowned prince’s desire caused a delay in making several key decisions regarding the IPO.
The sources also point to disagreements between high-level government officials, some of whom insist that Aramco shares to be sold only at the local level or that the IPO to be postponed until the end of 2018 at least or later, when, as they hope, oil prices may stabilize at $55-$60 per barrel.
“Industry sources said the sale of a significant stake to Chinese firms was one of several options being considered by the kingdom as it weighs the benefits of a public listing. One option includes selling some stock immediately to so-called cornerstone investors, such as China, and then selling shares on the local bourse as well as an international stock exchange, with New York, London and Hong Kong in the running,” the report reads.
It is also reported, Saudi Aramco was now evaluating a private placement of shares to a Chinese investor as a precursor to an international IPO, which could be delayed beyond 2018. But allowing China to buy 5 percent would effectively mean canceling the IPO altogether, which is an unlikely outcome, one of the sources said.