DUBAI (Reuters) - Saudi Arabia's government is considering a plan under which Aramco would buy a stake in Saudi petrochemical maker SABIC 2010.SE, a move that could boost the state oil giant's market valuation ahead of a planned initial public offering.

FILE PHOTO: The logo of Saudi Aramco is seen at Aramco headquarters in Dhahran, Saudi Arabia May 23, 2018. Picture taken May 23, 2018. REUTERS/Ahmed Jadallah/File Photo

Saudi Aramco IPO-ARAM.SE has invited banks to pitch for an advisory role on the potential acquisition of a strategic stake in Saudi Basic Industries Corp, two sources with direct knowledge of the matter told Reuters.

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

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 to the banks last month, said the sources, declining to be identified due to commercial sensitivities.

Riyadh-listed SABIC, the world’s fourth-biggest petrochemicals company, is 70 percent 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 process is in the initial stages and Aramco may or may not decide to go ahead with the deal, the sources said.

Aramco did not immediately respond to a Reuters request for comment. SABIC declined to comment.

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.

Aramco 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.