SEOUL (Reuters) – State-owned Saudi Aramco plans to invest up to $1.6 billion for a nearly 20 percent stake in South Korean refiner Hyundai Oilbank, expanding its foothold in one of its biggest Asian buyers of crude oil.

Saudi Aramco is already the biggest shareholder in South Korea’s No.3 refiner, S-Oil Corp, with a 63.41 percent stake, and the latest deal should help Aramco boost crude oil sales to Hyundai Oilbank, the South’s smallest refiner by capacity.

Saudi Aramco’s chief executive told Reuters in November that it planned to expand its market share in Asia – including China, India, Malaysia and Indonesia – and Africa.

Saudi Aramco plans to pay 1.8 trillion won for a stake of up to 19.9 percent of Hyundai Oilbank from Hyundai Heavy Industries Holdings, which now owns 91.13 percent of Hyundai Oilbank.

“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.

Saudi Energy Minister Khalid al-Falih said in early January that the state oil giant will be listed by 2021.

Saudi Arabia is the top crude oil supplier to South Korea, the world’s fifth-biggest importer.

In 2018, South Korea imported 323.17 million barrels of crude from the kingdom, or 885,408 barrels per day (bpd), according to data from Korea National Oil Corp.

Aramco, the world’s largest crude producer, plans to increase investment in refining and petrochemicals in a bid to cut its reliance on crude as demand for oil slows.

Hyundai Oilbank has a total of 650,000 barrels per day of refining capacity in the southwestern city of Daesan and also aims to expand its petrochemical business.

In May last year, it announced plans to build a 2.7 trillion won petrochemical plant with South Korea’s Lotte Chemical.

“RECONSIDER” HYUNDAI OILBANK IPO

The firm’s holding company, which also includes shipbuilder Hyundai Heavy Industries, said it would use the funds from the Oilbank deal to invest in new businesses and improve its financial structure, including cutting its debt-to-equity ratio.

Saudi Aramco plans to value Hyundai Oilbank at 10 trillion won, or 36,000 won per share, Hyundai Heavy Industries Holdings said in a statement.

A person familiar with the matter said the company plans to offer a discount of 10 percent to Saudi Aramco in a block deal that will require board approval from both firms next month.

Shares of the parent company ended up 3.8 percent after rising as much 6.6 percent. Shares of the country’s shipbuilders rallied across the board after Qatar said it plans to order 60 new LNG carriers from unidentified firms, speaking at a summit with South Korea.

Hyundai Heavy Industries Holdings said it planned to “reconsider” the stock market listing of the refinery arm after completing the stake sale, possibly this year.

Hyundai Oilbank, which had aimed to list on South Korea’s stock exchange in 2018, delayed the plan until this year due to regulatory scrutiny of its balance sheet.

The company said on Monday that its operating profit skidded 42 percent to 661 billion won last year, hurt by falling refining margins. S-Oil also saw its operating profit halve to 680 billion won in 2018.

Hyundai Heavy is part of a joint venture with Saudi Aramco and others to build a shipyard on Saudi Arabia’s eastern coast.