China’s sovereign wealth fund, CIC, and the state-owned oil firm CNPC are reportedly in talks with Saudi Arabia over a stake in the planned sale of shares in Saudi Aramco, expected to be the largest in the industry.
Anonymous sources with knowledge of the matter told Bloomberg Thursday CIC would be the principle investor in the initial public offering (IPO) of the world’s largest oil exporter. No formal agreement has been reached, they said.
The companies didn’t comment.
Saudi King Salman bin Abdulaziz is in Beijing until March 18, and has signed with Chinese President Xi Jinping memorandums of understanding worth $65 billion, Kallanish Energy reports. The 14 agreements cover 35 projects, in production capacity and investment cooperation.
Official Chinese media Xinhua News Agency reported Thursday Jinping told King Salman the countries should step up energy cooperation. Saudi is China’s biggest crude oil supplier and has been the largest trading partner in West Asia.
The Saudis are considering listing Aramco on exxchanges in New York, London, Singapore, Hong Kong and Tokyo, but nothing has been confirmed. The company, however, has recently increased its presence in Southeast Asia through two major refining deals — a $6 billion in Indonesia and a $7 billion transaction in Malaysia.
The strategy behind the investments is believed to be the creation of future demand for its crude oil, especially in growing Asian markets.
“It’s a win-win if China can take a sizable stake in the Aramco IPO,” Gordon Kwan, head of Asia-Pacific oil and gas research at Nomura Holdings, told Bloomberg. “China needs to ensure oil supplies from Saudi Arabia, given the structural decline of the country’s aging, mature fields. Saudi Arabia can ensure market share in China, which might want to insist Aramco be listed in Hong Kong instead of London or the U.S.”