BLOOMBERG/SIMON DAWSON
Chinese state-owned entities are in talks about investing a combined $5 billion to $10 billion in Saudi Aramco’s initial public offering (IPO) as the Kingdom seeks commitments from friendly governments to shore up the record share sale, reported Bloomberg.
President Xi Jinping has been seeking to revive ancient trading routes under his ‘One Belt, One Road’ initiative and investing in Saudi Aramco would cement ties with Saudi Arabia as well as provide China a way to profit from rising oil prices.
State-owned oil producer Sinopec Group and China Investment Corporation have also held talks in recent months about investing in the Saudi Aramco IPO. Commitments have not been finalised, and the lineup of investors, as well as the amounts each firm puts in, will ultimately depend on the Chinese government.
The Silk Road Fund was set up in 2014 with $40 billion of initial capital, it was later supplemented with another CNY 100 billion ($14 billion) of funds.
Large commitments from China would help Saudi Aramco make the share sale a success after Western money managers pushed back earlier on the company’s valuation. Bloomberg reported that Saudi Crown Prince Mohammed Bin Salman has long insisted the state oil company is worth $2 trillion, although he’s prepared to scale back his expectations to between $1.6 trillion and $1.8 trillion.
The head of Russia’s sovereign wealth fund said last week that Saudi Aramco’s IPO is a ‘unique opportunity’. Russian investors are keen to participate in the deal, said, Kirill Dmitriev, Chief Executive Officer of the Russian Direct Investment Fund.
Partners of the Russian sovereign wealth fund are considering taking part in the deal, however, no final decision has been made and investment amounts have not been set.
Similarly, Malaysian state energy company Petronas said that Saudi Aramco has invited the oil firm to participate in the IPO, a move that could help strengthen their ties.
The approach comes as Petroliam Nasional nears the start of commercial operations at a $27 billion refinery and petrochemical project built jointly with Saudi Aramco in southern Malaysia.
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