China mulls consortium for Aramco IPO

China

HONG KONG, April 19, 2017 – China is assembling a consortium of state oil firms and banks to participate in Saudi Aramco’s upcoming IPO with an eye on securing long-term supplies, international media reported on Wednesday.

The move would increase the likelihood that the Hong Kong bourse may be selected for next year’s listing, which is expected to be the world’s largest to date, Reuters reported. Rumours of Chinese interest in the IPO have been been circulating for several months now.

While a 5% stake in Aramco, according to Saudi officials, is expected to fetch USD 100 billion, there is little agreement among experts on how much exactly Aramco is worth. A tax cut for the company of over 40%, announced weeks ago, has further fuelled speculation on the company’s valuation.

Several anonymous sources told Reuters that China’s USD 800-billion sovereign wealth fund, oil giants Sinopec and PetroChina, as well as unnamed state-owned banks were on board for the consortium.

“The IPO will help decide whom, or which country, can secure the crude supplies from the company and Saudi Arabia going forward,” a source involved in the discussions told the agency.

“For instance, if you were already a strategic investor or plan to become one in the long-term, things would become easier.”

In other news from China, PetroChina’s Vice-President Tian Jinghui is set to replace the chief of the global oil trading business Chinaoil, Wang Lihua, who is about to retire. Both companies are subsidiaries of CNPC.

“If Tian is to continue his double-hat top role at the domestic fuel sales, he will then have a much larger base of resources to work on,” an anonymous former senior Chinaoil trader told Reuters.

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