Saudi Aramco in talks for stake with world's no. 4 chemical firm SABIC

Saudi Aramco said on Thursday it is looking to buy a stake in Saudi petrochemical maker SABIC, a move that could boost the state oil giant's market valuation ahead of a planned initial public offering.

Aramco said in a statement that it was in "very early-stage discussions" with the kingdom's Public Investment Fund to acquire the stake in SABIC via a private transaction. It has no plans to acquire any publicly held shares, it said.

In a separate statement, the PIF also said that talks about a sale were in early stages. "There is a possibility that no agreement will be reached in relation to this potential transaction," it said.

Reuters reported on Wednesday that Saudi Aramco had invited banks to pitch for an advisory role on the potential acquisition of a strategic stake in Saudi Basic Industries Corp, citing two sources with direct knowledge of the matter.

Aramco wants to develop its downstream business as the government prepares to sell up to 5 per cent of the world's largest oil producer, possibly by next year. Boosting its petrochemicals portfolio further could help attract investors for the IPO.

Riyadh-listed SABIC, the world's fourth-biggest petrochemicals company, is 70 per cent owned by the Public Investment Fund (PIF), Saudi Arabia's top sovereign wealth fund. It has a market capitalisation of 385.2 billion Saudi riyals ($102.7 billion).

The Aramco IPO is the centrepiece of an ambitious plan championed by Crown Prince Mohammed bin Salman to diversify Saudi Arabia's economy beyond oil. 

Aramco made the invitation for the SABIC deal to the banks last month, said the sources, declining to be identified due to commercial sensitivities.

Aramco plans to boost investments in refining and petrochemicals to secure new markets for its crude, and sees growth in chemicals as central to its downstream strategy to lessen the risk of a slowdown in oil demand.

The oil giant is expanding its footprint globally by signing downstream deals and boosting the capacity of its plants.

Aramco's push into chemicals also includes a mega project it is building at home with SABIC. The $20 billion project would build a complex that converts crude oil into chemicals directly, bypassing the refining stage.

($1 = 3.7503 riyals)