China, Saudis Said to Discuss CIC, CNPC Stake in Aramco IPO

(Bloomberg) -- China’s in talks with Saudi Arabia for its sovereign wealth fund and largest energy company to invest in the initial public offering of the Middle East nation’s state oil producer, according to people with knowledge of the matter.

The nation’s $814 billion China Investment Corp. would be the principle investor in the planned flotation by Saudi Arabian Oil Co., according to the people, who asked not to be identified because the talks are private. China National Petroleum Corp. may also invest in the IPO, they said. No formal agreement has been reached, according to the people.

Saudi King Salman bin Abdulaziz is visiting Beijing this week as the world’s biggest oil exporter gears up for what may be the largest-ever initial public offering. Hong Kong is among markets including London, New York, Singapore and Tokyo that have been identified as possible venues for the sale of 5 percent of the company, which is valued between $400 billion and $2 trillion.

China, the world’s biggest energy user, is growing more reliant on overseas crude as its domestic reserves dwindle and economic growth spurs higher demand. President Xi Jinping said in a meeting with King Salman that the nations should step up energy cooperation, Xinhua News Agency reported Thursday, adding that the countries signed $65 billion worth of memorandums of understanding during the visit.

“It is a win-win if China can take a sizable stake in the Aramco IPO,” said Gordon Kwan, head of Asia-Pacific oil and gas research at Nomura Holdings Inc. in Hong Kong. “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.”

Anchor Investments

A spokesman for Dhahran-based Aramco said the company doesn’t comment on rumor or speculation. A spokesman for CNPC in Beijing also declined to comment, while CIC didn’t respond to an emailed request for comment.

Chinese officials last year pitched a dual listing for the oil giant, known as Saudi Aramco, that would place the shares on both the Hong Kong and Saudi exchanges in return for anchor investments from Chinese funds, Bloomberg News reported.

Energy accounted for about 5 percent of CIC’s holdings in overseas publicly traded companies at the end of 2015, according to its most recent annual report. Chief Risk Officer Zhao Haiying said earlier this month that the fund intends to raise its share of alternative investments, such as real estate, private equity and hedge funds, over the medium- to long-term.

Saudi Aramco has partnered with units of China Petrochemical Corp., known as Sinopec, on projects in both countries, while it has been in talks with CNPC’s listed unit PetroChina Co. on a refinery in China’s Yunnan province. The Middle Eastern company signed a combined $13 billion of refining deals during the king’s recent visit to Malaysia and Indonesia as it seeks to secure long-term outlets for its crude before the IPO.

With assistance from Wael Mahdi, Zhang Dingmin and Aibing Guo. To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net; Jing Yang in Shanghai at jyang251@bloomberg.net To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net; Jessica Zhou at jzhou75@bloomberg.net Pratish Narayanan

Copyright 2017 Bloomberg News.

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