Page 8 - DMEA Week 11 2021

DMEA FINANCE & INVESTMENT DMEA

Price boost seen expediting

Aramco’s Reliance deal

MIDDLE EAST THE recent increase in oil price is likely to speed back on track, with momentum expected to
up progress in the protracted efforts by state- pick up from April this year. Meanwhile, citing
owned Saudi Aramco to acquire a 20% stake sources with intimate knowledge of proceedings,
in India’s Reliance Industries’ oil-to-chemicals India’s Economic Times said that the final deal
(O2C) division. could comprise a combination of stock and cash.
Sources at Reliance told India’s Business Despite having cut its 2020 capital pro-
Today that with prices hovering around $70 gramme by around $12bn owing to the impact of
per barrel, the resultant cash boost to Aramco the covid-19 pandemic, Aramco remains intent
will help expedite proceedings. Bank of Amer- on expanding dedicated markets to which it can
ica estimates that if prices remain at this level, sell crude long-term.
the Saudi firm will generate cash flow of around Business Today quoted a Reliance official as
$100bn in the 2021/22 financial year, poten- saying: “Aramco sees Reliance O2C as the dedi-
tially allowing Aramco to exceed its $75bn per cated buyer of its crude. When the uncertainties
year dividend promise. However, having leant rule the oil world, building a relation in one of
heavily on debt to fill the void last year, it appears the largest oil consuming countries will solidify
unlikely that the company will take such a short- its position for future.”
term outlook. In February, Reliance shares rose 1.5% after
In August 2019, Aramco signed a letter of reports emerged that it was finalising a deal that
intent (LoI) to purchase a 20% stake in Reliance’s would demerge its O2C business into a subsid-
refining, petrochemicals and fuels marketing iary that will initially be wholly owned by the
businesses for around $15bn, thereby valuing parent. The new O2C subsidiary will be include
Ambani’s company at $75bn. Reliance’s refining and petrochemicals assets,
Reliance’s chairman and managing director its bulk wholesale marketing business, its fuel
Mukesh Ambani added that as part of the deal, retail arm which comprises a 51% stake in a joint
his company would agree to a long-term pur- venture with BP and oil trading subsidiaries in
chase of 500,000 barrels per day (bpd) of Ara- Singapore and the UK.
mco crude. While the details of the spin-off are yet to be
Downstream MEA (DMEA) reported last concluded, Reliance is expected to be valued at
month that talks about the potential deal were $75-85bn including the company’s debt.™

Reliance’s Jamnagar
mega refinery from
above.

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