RIL renegotiates Aramco deal to reevaluate structure after new

RIL renegotiates Aramco deal to reevaluate structure after new

After missing two self-imposed deadlines, billionaire Mukesh Ambani’s Reliance Industries Ltd on Friday announced a proposed $15 billion deal to sell a 20 per cent stake in its oil refinery and petrochemical business to Saudi Aramco. That the two firms agree to re-evaluate the proposed investment in the light of the Indian firm’s new energy efforts. The stake sale talks, which first surfaced officially in August 2019, are being reset in the light of Reliance entering the new energy business in recent months by investing $10 billion in alternative energy over three years . To move towards green energy, it has already bought a German manufacturer of photovoltaic solar wafers and signed an agreement with a Danish company to manufacture hydrogen electrolysers in India. Aramco’s proposed investment was limited only to the oil refining and petrochemical business, but Reliance now also has a growing green energy business that needs to be reset. “Due to the evolving nature of Reliance’s business portfolio, Reliance and Saudi Aramco have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in the O2C business in light of the changed context,” the Indian firm said in a statement. said in. Statement. Consequently, Reliance had applied to the NCLT to allow stake sale to demerge the oil-to-chemical (O2C) business, which is being withdrawn. The company, however, refrained from giving any new timeline for executing any possible deal. “Over the past two years, both teams have put in significant efforts in the process of due diligence, despite the COVID restrictions. This has been made possible due to the mutual respect and long-standing relationship between the two organizations,” the statement said. “

Click here to read the press release

The company said it has recently unveiled its plans for new energy and materials businesses by announcing the development of the Dhirubhai Ambani Green Energy Giga Complex in Jamnagar, which includes solar photovoltaic modules, energy storage factories, making electrolysers for green will include four giga-factories. Hydrogen and fuel cell factory. “The deepening engagement over the past two years has given both Reliance and Saudi Aramco a greater understanding of each other, providing a platform for wider areas of cooperation. Saudi Aramco and Reliance are deeply committed to building a win-win partnership. and will make future disclosures as appropriate,” the statement said. Reliance said it will continue to be Saudi Aramco’s preferred partner for private sector investments in India and will collaborate with Aramco and SABIC for investments in Saudi Arabia. “Saudi Aramco and Reliance share a very deep, strong and mutually beneficial relationship that has been developed and nurtured by both the companies over the past 25 years. The two companies look forward to cooperate and further strengthen the relationship in the years to come. Committed to work.” added. Ambani had in August 2019 announced talks for the sale of a 20 per cent stake in the O2C business, including its twin oil refinery in Jamnagar, Gujarat, and petrochemical assets to the world’s largest oil exporter. He had expected to conclude the deal by March 2020, making the announcement at the company’s annual general meeting that year.

But it got delayed due to reasons not disclosed by any of the companies.

Negotiations resumed this year and the two are reportedly discussing a cash-and-share deal — with Aramco initially paying for the stake with its shares and then withholding the cash payments over several years. In June this year, Reliance appointed Yasser Othman Al-Rumaiyan, chairman of Saudi Aramco and head of the Kingdom’s cash-rich wealth fund PIF, as an independent director on its board. The appointment was said to be a precursor to the deal. Ambani said at the company’s annual shareholder meeting on June 24, 2021, that he expected the “partnership” with Aramco to be formalized “expeditiously over the course of this year.” This looks unlikely and the deal is now being reset. Apart from refineries and petrochemical plants, the O2C business also comprises a 51 per cent stake in the fuel retail business. However, it does not include upstream oil and gas producing assets such as the KG-D6 block in the Bay of Bengal. The stake in Reliance’s O2C business will give Aramco entry into one of the world’s fastest growing fuel markets. It will also provide a ready market for 5 million barrels per day of its Arabica crude oil and offer a potentially larger downstream role in the future. Reliance had invested $75 billion in 2019 as the value of the O2C business, after signing a non-binding letter with Saudi Aramco. Aramco has an equity stake in China’s biggest O2C project in Zhejiang with a long-term crude oil supply agreement and plans to build a network of retail outlets. It also has a fuel retailing joint venture with Sinopec operating 1,000 retail outlets. An investment in Reliance’s O2C subsidiary could give Aramco a similar footprint – a stake in India’s biggest O2C project with a long-term crude supply agreement and participation in fuel retailing through a Reliance-BP joint venture. Over the years, the oil-to-telecom conglomerate has separated businesses into different verticals – Jio Platforms has the company’s digital and telecommunications unit, retail a separate entity and oil refining and petrochemical segments to attract Engraved in O2C vertical. strategic partnership. The firm had recently announced the creation of the O2C business as a separate subsidiary to support strategic partnerships and new investors to accelerate its new energy and materials plans. Buying a 20 per cent stake in Aramco’s O2C business will help Reliance build financial strength as it carves a niche for itself in the highly competitive omni-channel retail. With the stake, Aramco will have a stake in one of the world’s best refineries and the largest integrated petrochemical complex.

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is generated automatically from a syndicated feed.)

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