China offers to buy 5 per cent of Aramco directly, giving it flexibility in fundraising plan

China is offering to buy up to 5 per cent of Saudi Aramco directly, sources said, a move that could give Saudi Arabia the flexibility to consider various options for its plan to float the world’s biggest oil producer on the stock market.

Chinese state-owned oil companies PetroChina and Sinopec have written to Saudi Aramco in recent weeks to express an interest in a direct deal, industry sources told Reuters. The companies are part of a state-run consortium including China’s sovereign wealth fund, the sources say.

Saudi Arabia’s Crown Prince Mohammed bin Salman said last year the kingdom was considering listing about 5 per cent of Aramco in 2018 in a deal that could raise US$100 billion, if the company is valued at about US$2 trillion as hoped.

“The Chinese want to secure oil supplies,” one of the industry sources said. “They are willing to take the whole 5 per cent, or even more, alone.”

PetroChina and Sinopec declined to comment. The initial public offering (IPO) of Saudi Aramco is the centrepiece of an economic reform plan to diversify the Saudi economy beyond oil and it would also provide a welcome boost to the kingdom’s budget which has been hit by low oil prices.

But the IPO plan has created public misgivings that Riyadh is relinquishing its crown jewels to foreigners cheaply at a time of low oil prices. Some Aramco employees would like the whole idea to be shelved, sources say.