China is offering to buy up to 5 percent of Saudi Aramco directly, sources say, 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. Sonia Legg reports
It's the centre piece of Saudi Arabia's reform plan. But plans to list 5% of state-owned Aramco could be thrown into disarray by China. Reuters believes the state-owned oil companies PetroChina and Sinopec have written to Aramco expressing an interest in a direct deal. They're part of a state-run consortium, which includes China's sovereIgn wealth fund. (SOUNDBITE) (English) IG SENIOR ANALYST, CHRIS BEAUCHAMP, SAYING: "It certainly is a good bit of diplomacy from Saudi Arabia which is looking to try and lever itself back into the Chinese market having been somewhat displaced by the Russians. And it would come with, so the story suggests, a reciprocal deal to provide help to the Chinese refining industry so it makes a lot of sense it could mean that the Aramco IPO is at least delayed yet further." The idea of a public listing, which could raise $100 billion, hasn't gone down well in Riyadh. Some think it's like selling the crown jewels cheaply at a time of low oil prices. This way Aramco could offer smaller portions of shares on local exchanges. (SOUNDBITE) (English) IG SENIOR ANALYST, CHRIS BEAUCHAMP, SAYING: "It does give them a lot more flexibility here, helped of course by the improvement in the oil price. Really we've seen a lot of resilience over the last few weeks. Reasons why higher of course because the crisis in Iraq. But overall oil seems to be in a good place for Saudi at the moment I think there should be relatively comfortable about listing a smaller amount and allowing China to take that 5 percent stake." China's not the only country said to be showing an interest - South Korea, Japan and Russia are apparently keen on a stake. Some now think Aramco may opt for a private placement of shares ahead of an international listing, possibly delaying the world's biggest ipo until 2018.