Saudi Aramco Said to Hire Deutsche Bank for CNPC Deal Talks

(Bloomberg) -- Saudi Arabian Oil Co., the world’s largest oil exporter, hired Deutsche Bank AG to advise on the potential acquisition of some marketing, retail and refining assets from China National Petroleum Corp., according to four people with knowledge of the matter.

A deal could be worth several billion dollars, though talks are at an early stage and an agreement may not be reached, the people said, asking not to be identified as the information is private.

Saudi Aramco, as the company is known, is expanding into refining and petrochemicals and seeking to boost ties with Asia as part of its strategy to become one of the world’s largest oil and chemicals companies by the end of the decade. It’s planning to spend between $70 billion and $80 billion on overseas acquisitions and investments during the next five years, people with knowledge of the matter told Bloomberg in May.

The state-owned oil company in May signed a $10 billion revolving credit facility with a group of international and Middle Eastern banks. Those funds may be targeted at acquisitions and other investments, people familiar with the matter said.

Shares of CNPC’s listed arm, PetroChina Co., rose 4.8 percent at 10:32 a.m. Tuesday in Hong Kong, the most in almost a month. The benchmark Hang Seng Index rose 0.7 percent.

Market Discipline

Saudi Aramco is pursuing the CNPC assets as Chinese President Xi Jinping seeks to introduce more market discipline to government-controlled companies, part of efforts to reinvigorate a $10 trillion economy headed for its slowest growth in a quarter century. China released guidelines last month urging state enterprises to allow outside investors in their businesses and encouraging them to upgrade their management with more transparency.

State-controlled China Petroleum & Chemical Corp., known as Sinopec, last year sold a 107 billion yuan ($16.8 billion) stake in its retail arm to a group of investors including China Life Insurance Co. Sinopec’s parent company also listed its petroleum engineering business in Hong Kong as part of a 30.6 billion yuan reorganization.

Last month, Aramco and Germany’s Lanxess AG formed a 2.75 billion euro ($3.1 billion) synthetic rubber joint venture, while last year the Saudi government owned company bought a $2 billion stake in S-Oil Corp., South Korea’s third-largest oil refiner.

CNPC’s Beijing-based spokesman Qu Guangxue didn’t answer two calls to his office seeking comment on Monday, a public holiday in China. Saudi Aramco and Deutsche Bank declined to comment.

--With assistance from Aibing Guo in Hong Kong.

To contact the reporters on this story: Dinesh Nair in London at dnair5@bloomberg.net; Matthew Martin in Dubai at mmartin128@bloomberg.net; Stefania Bianchi in Dubai at sbianchi10@bloomberg.net. To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net; Aaron Kirchfeld at akirchfeld@bloomberg.net Ben Scent, Ramsey Al-Rikabi.