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Saudi Aramco halts IPO as China offers to buy 5% directly instead (Reuters)

Guevara

Member
Jul 27, 2009
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China is offering to buy up to 5 percent 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 (0857.HK) and Sinopec (0386.HK) 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 percent of Aramco in 2018 in a deal that could raise $100 billion (£75.2 billion), if the company is valued at about $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 percent, 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.

Internal disagreements between what some advisers recommend and what the crown prince wants have delayed several key decisions about the IPO, industry sources said.

https://uk.reuters.com/article/uk-s...f-saudi-aramco-directly-sources-idUKKBN1CL1WX

Pretty stunning reversal, with some implications for both the modernization of Saudi Arabia, and Chinese/Saudi relations. That said, an eventual floatation is still likely.
 

bobbytkc

ADD New Gen Gamer
Feb 28, 2007
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This is not a done deal. They have not made a choice to sell to thw chinese yet.

They have not made any statements about whether the ipo will still happen, to my knowledge.
 

Guevara

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Jul 27, 2009
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This is not a done deal. They have not made a choice to sell to thw chinese yet.

They have not made any statements about whether the ipo will still happen, to my knowledge.

True, but they did tell their IPO advisors to "halt IPO activities" based on a different Reuters report.
 

Madness

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Jan 1, 2013
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China is smart and can afford it

They've been smart for two decades. Played the US for a fool. Used US capital and investment to secure licensing of technologies, improve their infrastructure, enter the WTO and flood tbe global market with Chinese exports. In the end, the US helped China become the future superpower. You could say the US benefitted as well from low cost of consumer goods, massive jobs and capital as US companies used Chinese labor to grow. But in the end, the Chinese mainland invested in their companies to help with global dominance, they have invested $300+ billion dollars to help prop up clean energy companies at a time the US is pulling back and not funding much etc. Saudi Arabia will still ultimately float the IPO, but China getting such a stake would be good for their oil security. Their OBOR initiative to help with import and export, control over the South China Sea is helping them dominate Central and East Asia.
 

FullMetalx117

Member
Jul 21, 2012
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Dallas, TX
They've been smart for two decades. Played the US for a fool. Used US capital and investment to secure licensing of technologies, improve their infrastructure, enter the WTO and flood tbe global market with Chinese exports. In the end, the US helped China become the future superpower. You could say the US benefitted as well from low cost of consumer goods, massive jobs and capital as US companies used Chinese labor to grow. But in the end, the Chinese mainland invested in their companies to help with global dominance, they have invested $300+ billion dollars to help prop up clean energy companies at a time the US is pulling back and not funding much etc. Saudi Arabia will still ultimately float the IPO, but China getting such a stake would be good for their oil security. Their OBOR initiative to help with import and export, control over the South China Sea is helping them dominate Central and East Asia.

Great analysis. Also worth noting that China itself has vast shale reserves but does not have the infrastructure yet to develop and extract the oil. A steak in Aramco can potentially help with this development.
 

Cybit

FGC Waterboy
Jul 17, 2013
4,888
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465
They've been smart for two decades. Played the US for a fool. Used US capital and investment to secure licensing of technologies, improve their infrastructure, enter the WTO and flood tbe global market with Chinese exports. In the end, the US helped China become the future superpower. You could say the US benefitted as well from low cost of consumer goods, massive jobs and capital as US companies used Chinese labor to grow. But in the end, the Chinese mainland invested in their companies to help with global dominance, they have invested $300+ billion dollars to help prop up clean energy companies at a time the US is pulling back and not funding much etc. Saudi Arabia will still ultimately float the IPO, but China getting such a stake would be good for their oil security. Their OBOR initiative to help with import and export, control over the South China Sea is helping them dominate Central and East Asia.

In a way they did a lot of what we did during our rise, have cheap-ish labor (and in our case, oodles of natural resources), reinvested it in the country (interstate system, public infrastructure, R&D such as NACA/NASA), and used those technologies to make ourselves a dominant economic power. Kinda ironic we made the same mistakes Europe did during our own rise.
 

Jumeira

Member
Aug 11, 2015
4,028
0
265
They've been smart for two decades. Played the US for a fool. Used US capital and investment to secure licensing of technologies, improve their infrastructure, enter the WTO and flood tbe global market with Chinese exports. In the end, the US helped China become the future superpower. You could say the US benefitted as well from low cost of consumer goods, massive jobs and capital as US companies used Chinese labor to grow. But in the end, the Chinese mainland invested in their companies to help with global dominance, they have invested $300+ billion dollars to help prop up clean energy companies at a time the US is pulling back and not funding much etc. Saudi Arabia will still ultimately float the IPO, but China getting such a stake would be good for their oil security. Their OBOR initiative to help with import and export, control over the South China Sea is helping them dominate Central and East Asia.

Very insightful, thank you.
 
Dec 11, 2012
4,940
2
0
They've been smart for two decades. Played the US for a fool. Used US capital and investment to secure licensing of technologies, improve their infrastructure, enter the WTO and flood tbe global market with Chinese exports. In the end, the US helped China become the future superpower. You could say the US benefitted as well from low cost of consumer goods, massive jobs and capital as US companies used Chinese labor to grow. But in the end, the Chinese mainland invested in their companies to help with global dominance, they have invested $300+ billion dollars to help prop up clean energy companies at a time the US is pulling back and not funding much etc. Saudi Arabia will still ultimately float the IPO, but China getting such a stake would be good for their oil security. Their OBOR initiative to help with import and export, control over the South China Sea is helping them dominate Central and East Asia.
Thanks for this.
 

Mr.Mike

Member
Jul 4, 2013
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In a way they did a lot of what we did during our rise, have cheap-ish labor (and in our case, oodles of natural resources), reinvested it in the country (interstate system, public infrastructure, R&D such as NACA/NASA), and used those technologies to make ourselves a dominant economic power. Kinda ironic we made the same mistakes Europe did during our own rise.

Mistake? Should China have been kept poor for the sake of maintaining the US's power? No.
 

BriareosGAF

Member
May 13, 2009
2,546
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Mistake? Should China have been kept poor for the sake of maintaining the US's power? No.

You could write a countervailing narrative about the US smartly outsourcing externalities of highly polluting industrial process, China building a huge bubble in real estate/infrastructure, capital flight out of the country as citizens attempt to convert currency into tangible wealth through foreign real estate purchase, etc. It's complicated stuff, no paragraph is going to be able to encapsulate it all.

There was a decent short write-up on the Saudi situation, including the Aramco IPO, in last month's London Review of Books.