Aramco to supply 500,000 barrels per day of crude oil to Jamnagar Refinery
In a milestone move, India’s Reliance Industries Limited (RIL) is in the process of selling a 20% stake in the company’s flagship chemicals and refining business to Saudi Aramco in a deal valued at US$ 15bn.
This two-fold strategic move by RIL will ease its ballooning debt and secure an assured supply of crude oil to its refineries.
Chairman Mukesh Ambani Asia’s richest man, announced the proposed transaction at the company’s recent 42nd annual general meeting, although the terms of the deal have not been finalized.
The deal, which values the oil-to-chemicals (O2C / OTC) business at US$ 75bn, is part of a plan to make RIL a zero-debt company in the next 18 months, Ambani said in a speech at the annual meeting.
“Saudi Aramco will invest in Reliance for a 20% stake in oil-to-chemicals division at an enterprise value of US$ 75bn for the O2C division, which will be demerged into a separate subsidiary in the next five years,” Ambani told shareholders.
RIL-BP pact
In addition to the stake sale to Aramco, RIL will raise $1 billion from BP, which will acquire a 49% stake in RIL’s petro-retailing business for IRS ₹7,000 crores (US$ 984bn), said Ambani.
The investments are subject to due diligence, definitive agreements, regulatory and other approvals, Ambani said, adding that the Saudi Aramco partnership will cover all of RIL’s refining and petrochemicals assets, including its 51% stake in the fuel retailing joint venture with BP.
RIL and BP announced a joint venture to open a nationwide network of fuel retail outlets last week.
Sustained supply
As part of the proposed deal, Saudi Aramco will also supply 500,000 barrels per day of crude oil on a long-term basis to RIL’s Jamnagar refinery in India’s western Gujarat State.
Saudi Aramco, the most profitable company in the world, controls the world’s second-largest proven crude reserves at more than 270 billion barrels, and the partnership will go a long way in insulating RIL from any future oil elasticity and volatility in crude prices, said industry experts.
RIL has developed a strategy to transform the Jamnagar refinery from a producer of fuels to chemicals, moving up the value chain. The complexity index of RIL’s Jamnagar integrated refinery has been enhanced to 21.1 (from 12.7 in 2016) after the commissioning of various integrated projects and petcoke gasifiers.
