The Strategist

China offers to buy 5% stake in Saudi Aramco

10/17/2017 - 08:10

State Petroleum Corporation of China PetroChina and Sinopec offered to buy 5% of Saudi Aramco’s shares directly from Saudi Arabia, without waiting for their planned initial public offering.

Daniel Case
Daniel Case
This was reported by the Reuters agency with reference to a number of unnamed sources in the oil industry. As noted, the state-owned companies of China sent letters to Saudi Aramco’s managers, expressing interest in direct purchase of the company's shares.

As noted, the Chinese authorities are forming a consortium of the Sovereign Fund of China and energy, financial companies, seeking to become Saudi Aramco’s anchor investor. The consortium would have acquired shares of the world's largest oil exporter. One source at the agency said: "China wants to guarantee the supply of oil, they want to buy the whole package of 5% or even more."

Information about China's potential interest in buying a stake in Saudi Aramco appeared in April this year. A new element in this story, according to Reuters sources, is that heads of Saudi Aramco are now considering the option of selling a portion of shares to investors from China, before holding an IPO on one of the world exchanges.

At the same time, the initial public offering of Saudi Aramco’s shares, which was previously announced for 2018 in connection with a potential deal with China, may be postponed to a later date.

Sources of Reuters also reported that sovereign funds of South Korea and Japan, as well as the Russian Direct Investment Fund, are also interested in buying Saudi Aramco’s shares. 

A little earlier, the Chinese energy company CEFS announced its intention to become the third largest shareholder of the Russian oil company Rosneft.

The consortium of the Swiss trader Glencore and the Qatar investment fund QIA closed negotiations with the Chinese CEFC for the sale of a 14.16% stake in Rosneft. For this package of securities, the company from China will pay 3.9 billion euros and the equivalent of $ 4.58 billion.

As a result of this transaction, Chinese energy company CEFC may become the third largest shareholder of Rosneft after state-owned Rosneftegaz (50% plus 1 share) and British BP (19.75%).

Glencore and QIA fund bought a 19.5% stake in Rosneft in December last year for 10.2 billion euros. Thus, the sellers are the gainers. The consortium will involve Intesa Sanpaolo and a number of Russian banks to pay off the proceeds from the sale of the stake in Rosneft. As a result of the transaction, Glencore and QIA will hold 0.5% and 4.8% of Rosneft shares, respectively.

Earlier, head of the Russian company Igor Sechin said that the purchase of a 14.2% stake in Rosneft from the consortium QIA and Glencore by the Chinese CEFC (Huaxin) was agreed during the September BRICS summit in China. The Swiss trader and the Qatari investment fund had to abandon this package of securities because of the devaluation of the dollar. That is why the Chinese company (CEFC) China Energy Company Limited was involved in the transaction, Sechin explained.