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Aramco to buy 20% of RIL’s OTC business
RIL’s Mukesh Ambani has announced that Aramco will buy a major stake in the company’s oil-to-chemicals business as he looks to cut a heavy debt burden
COMMENTARY
WHAT:
Aramco will acquire the 20% stake for around $15bn, which appears to be a very solid investment.
WHY:
The Saudi rm has been making major progress on its plans to ramp
up its global re ning capacity in order to secure a long-term market for its crude.
WHAT NEXT:
Both parties would appear to bene t from the move and if it closes, it will take Aramco another signi cant step towards its downstream goal.
SAUDI Aramco is set to acquire a 20% stake in Indian company Reliance Industries Ltd’s (RIL) oil-to-chemicals division, which includes the world’s largest re nery.
News of the deal was announced by RIL chairman Mukesh Ambani during the compa- ny’s AGM in Mumbai. With RIL’s OTC division valued at $75bn, Aramco is expected to pay $15bn to acquire the 20% interest in the rm’s re ning, petrochemicals and fuels marketing businesses.
Speaking to Bloomberg, Aramco senior vice president of nance Khalid al-Dabbagh con rmed that a letter of intent (LoI) had been signed, but said talks were in the “very, very early stages”.
The move comes as Aramco aims to raise global re ning capacity to 8-10mn barrels per day by 2030, with expansion focused on major Asian consumers of the kingdom’s crude. Down- stream investment projects in China, India, Indonesia, Malaysia and Pakistan are at various stages of execution.
Most of Aramco’s current 4.9mn bpd capacity is produced through joint ventures, with around 2-3mn bpd of the total envisaged being converted to petrochemicals, to add to the 17mn tonnes per year of petrochemicals already produced.
Ambani’s announcement follows a meeting he had in December with Saudi Arabia’s Energy, Industry & Mineral Resources Minister and
Aramco chairman Khalid al-Falih, a er which he con rmed that co-investments in re ning and petrochemicals were under discussion.
The Saudi firm’s CEO Amin Nasser also had talks with Ambani during a state visit to India by Crown Prince Mohammed bin Sal- man (MbS) in February.
In mid-April, the plans seemed to acquire firmer shape, as serious discussions were reported to be ongoing for Aramco to purchase 20-25% of Reliance’s re ning and petrochemi- cals business in a deal potentially worth $10- 15bn. Goldman Sachs was said to be advising.
RIL game changer
India’s fast-growing market is inevitably a key target market and is the planned destination of Aramco’s largest international investment to date. e Saudi rm is involved in a proposed $44bn 1.2mn-bpd re nery and petrochemicals complex in the western Maharashtra state along- side Abu Dhabi National Oil Co. (ADNOC) and three New Delhi-owned oil companies.
However, local opposition to the original- ly-planned site at Ratnagiri appears set to delay the scheme and there has been talk of a move to Roha, in Raigad district, independently of which Aramco executives have publicly stated plans for additional projects in the country and in particu- lar co-investments with RIL.
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w w w . N E W S B A S E . c o m Week 32 14•August•2019