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Chinese giants to buy stakes in Saudi Aramco

Two major Chinese energy enterprises have reportedly offered to purchase five percent of Saudi Arabia’s state company Aramco. 

Reuters quoted industry sources as saying that PetroChina and Sinopec had recently submitted their official proposal to purchase the shares of the world’s biggest oil producer directly.

This followed an announcement by Saudi Crown Prince Mohammed bin Salman last year that the kingdom was considering listing about 5 percent of Aramco in 2018 in a deal that could raise $100 billion, if the company is valued at about $2 trillion as hoped.

“The Chinese want to secure oil supplies,” Reuters quoted an unnamed industry source as saying. “They are willing to take the whole 5 percent, or even more, alone.”

The initial public offering (IPO) of Saudi Aramco is the centerpiece of an economic reform plan to diversify the Saudi economy beyond oil and it would also provide a welcome boost to the kingdom’s budget which has been hit by low oil prices.

But the IPO plan has created public misgivings that Riyadh is relinquishing its crown jewels to foreigners cheaply at a time of low oil prices. Some Aramco employees would like the whole idea to be shelved, Reuters further quoted sources as saying.

Last December, Saudi Arabia announced plans to sell 49 percent of Aramco – which has a daily oil production capability of 12.5 million barrels – as part of its attempts to lower its deficit.

Officials in Riyadh were quoted as saying at the time that the sales would be carried out over a 10-year period, and that the income from the sales will be spent “at home and abroad.”

 

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