Page 7 - DMEA Week 08 2021

DMEA INVESTMENT DMEA

Aramco and Reliance resume O2C talks

SAUDI ARABIA TALKS are reported to be back on track for that the recent oil price boost has allowed the
state-owned Saudi Aramco to acquire a 20% company’s finances to recover significantly from
stake in India’s Reliance Industries Ltd’s (RIL) the woes that led it to reduce its 2020 capital pro-
oil-to-chemicals (O2C) division, which includes gramme by around $12bn, the Dhahran-based
the world’s largest refinery. company is now in a better position to move
A report in India’s Economic Times said that forward.
negotiations on the deal are seen picking up However, the shock of the combined impact
momentum from April this year, citing sources of the pandemic, weak demand and plummet-
with intimate knowledge of proceedings who ing oil prices has brought greater scrutiny on all
said that the final deal could comprise a combi- spending, particularly in the downstream, which
nation of stock and cash. has been haemorrhaging cash, which is likely to
In August 2019, Aramco signed a letter of be behind the stock and cash approach.
intent (LoI) to purchase a 20% stake in Reliance’s The news comes as Reliance shares rose 1.5%
refining, petrochemicals and fuels marketing after the Economic Times reported that it was
businesses for around $15bn, thereby valuing finalising a deal that would demerge its O2C
Ambani’s company at $75bn. business into a subsidiary that will initially be
Reliance’s chairman and managing director wholly owned by the parent.
Mukesh Ambani added that as part of the deal, The new O2C subsidiary will be include
his company would agree to a long-term pur- Reliance’s refining and petrochemicals assets,
chase of 500,000 barrels per day (bpd) of Ara- its bulk wholesale marketing business, its fuel
mco crude. retail arm which comprises a 51% stake in a joint
“Saudi Aramco and Reliance have agreed venture with BP, and oil trading subsidiaries in
to form a long-term partnership in our oils to Singapore and the UK.
chemicals division […] This signifies the perfect While the details of the spin-off are yet to be
synergy between the world’s largest oil producer concluded, Reliance is expected to be valued at
and world’s biggest integrated refinery and pet- $75-85bn including the company’s debt.
rochemicals complex,” he said. The news also brings into focus Aramco’s
He added that while the deal was subject to involvement in a proposed $70bn, 1.2mn bpd
due diligence, by ensuring Aramco crude is used refinery and petrochemicals complex in India’s
as feedstock for the refinery, the deal could pay western Maharashtra State alongside Abu Dhabi
for itself within 18 months. National Oil Co. (ADNOC) and three New Del-
While the talks were reported to have been hi-owned oil companies.
paused given the impact of the COVID-19 Progress on the project has been caught up in
pandemic, Aramco CEO Amin Nasser said in delays acquiring land and Aramco is reported to
August last year that “the work is still on. We will have expressed serious concerns, though it has
update our shareholders in due course”. Given not yet spoken of plans to withdraw.™

Reliance’s Jamnagar
refinery from the air

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