The world’s largest energy company Saudi Aramco is looking to take a $1.6bn (£1.2bn) stake in a South Korean oil refiner, as it seeks to diversify its portfolio.
The firm is planning to take a 20 per cent of Hyundai Oilbank, the smallest refiner in the country.
The deal will see the Saudi state-owned company add to its holdings in the world’s fifth-largest oil importer. The deal will strengthen Saudi Arabia’s energy hold over South Korea, which already relies on the gulf state as its biggest supplier.
It already owns a 63 per cent stake in South Korea’s third largest refiner S-Oil Corp.
The deal comes as Saudi Aramco looks to diversify its cash flows before it lists in 2021.
“Saudi Aramco seems to be boosting investments in downstream projects ahead of an initial public offering,” said Lee Dong-wook, an analyst at Kiwoom Securities.
Last year South Korea imported 885,000 barrels per day from Saudi Arabia. Hyundai Oilbank has a total capacity of 650,000 barrels per day.
Sources told Reuters that Oilbank’s parent Hyundai Heavy Industries Holdings will offer the stake at a 10 per cent discount to the 10 trillion won valuation (£6.6). However shares in the parent company closed at 3.8 per cent up after highs of up to 6.6 per cent earlier in the day.
Hyundai Heavy Industries said it was reconsidering a planned listing of its refinery arm after the stake sale. It was originally meant to float last year.