In order to act as a cornerstone investor in the initial public offering of Saudi Aramco, China is creating a consortium, including state-owned oil giants and banks and its sovereign wealth fund, reported Reuters citing people with knowledge of the discussions.
With a potential $100 billion equity sale that is expected to be the world’s largest to date, Saudi Aramco, a key exporter to China along with Russia’s Rosneft, is due to list next year.
With Hong Kong currently the frontrunner among bourses in the region, the same people said that the planned Chinese investment makes it more likely that the national energy giant would seek a listing in Asia.
As the country – the second biggest consumer of oil globally – seeks to secure crude supplies, Chinese companies were interested in investing in the Aramco IPO, Saudi officials have said. However, comments on how that would be done have not been made to far.
Among the state-backed entities set to participate in the Chinese investment consortium were the country’s state-run banks, oil majors Sinopec and PetroChina, and China Investment Corporation (CIC), the country’s $800 billion sovereign wealth fund.
The sources did not name the banks. Pitching for a role in the IPO were China International Capital Corporation (CICC) and Industrial and Commercial Bank of China International Holdings, a unit of Industrial and Commercial Bank of China, Reuters had reported in February.
The ultimate size of the consortium’s stake had not yet been decided, said reported Reuters citing one person involved in discussions between Aramco and potential Chinese investors. with many state-run groups keen to take on the high-profile role, the entity that would lead the consortium had also not been decided, the source reportedly said. That is likely to be decided by China’s cabinet, the State Council, over the coming months.
“The IPO will help decide whom, or which country, can secure the crude supplies from the company and Saudi Arabia going forward,” the person said, adding the size of each company’s stake in the Chinese consortium would depend on its current relationship with Aramco and the Saudi government.
“For instance, if you were already a strategic investor or plan to become one in the long-term, things would become easier.”
There were no comments from the State Council Information Office, CIC, Sinopec and PetroChina.
While Sinopec has said the oil giant would discuss the IPO with Aramco, PetroChina’s president and vice chairman, Wang Dongjin, said last month that the company would consider participating in the IPO depending on market conditions.
Saudi Aramco said in an email it did not comment on “rumor or speculation”.
On the Saudi stock exchange in Riyadh, the Tadawul, and also one or more international markets, Saudi authorities plan to list up to 5 percent of Aramco.
although some analysts believe the ultimate valuation could be much lower, the $100 billion IPO price tag is based on Aramco being valued at $2 trillion.
Other mooted Asian options include Tokyo and Singapore.
“The Saudis are serious about Asia. They can maintain market share there. At the end of the day, Aramco needs to sell its oil. This is just another way of guaranteeing a long-term market,” one industry source said.
(Adapted from Reuters)