Companies

Reliance to sell 20% stake in oil-to-chemicals biz to Saudi Aramco at $75 bn enterprise value

Our Bureau Mumbai | Updated on August 13, 2019 Published on August 12, 2019

Mukesh Ambani, Chairman, Reliance Industries   -  Paul Noronha

Mukesh Ambani

Reliance Industries Ltd (RIL) will sell a 20 per cent stake in its oil-to-chemicals business to Saudi Aramco at an enterprise value of $75 billion, making it one of the biggest Foreign Direct Investment (FDI) deal in the country.

“This is the biggest foreign investment in the history of Reliance. It is also amongst the largest foreign investments ever in India,” RIL Chairman and Managing Director Mukesh Ambani said at the company's AGM in Mumbai.

Saudi Aramco will supply 500,000 barrels per day, or 25 million tonnes per annum, of crude oil to RIL’s twin refineries at Jamnagar in Gujarat. The Saudi oil giant will take a 20 per cent stake in a proposed special purpose vehicle (SPV) housing the twin refineries of RIL and the firm's petrochemical complex.

RIL operates two refineries in Jamnagar, Gujarat, with a total capacity of 68.2 million tonne per annum.

This partnership will cover all of RIL's refining and petrochemicals assets, including 51 per cent of the petroleum retail joint venture.

“This signifies perfect synergy between the world's largest oil producer and the world's largest integrated refinery and petrochemicals complex,” Ambani said, adding, since its inception, the Jamnagar refinery has been processing Saudi oil every single day for 20 years.

A commitment worth over 1 lakh

"Reliance said will receive Rs 7,000 crore from BP for acquiring a 49 per cent stake in the petro-retail JV. The commitment from these two transactions (Saudi Aramco and BP) are about Rs1.1 lakh crore,” Ambani said.

Saudi Aramco has been eyeing stakes in refining ventures overseas to guarantee new outlets for its crude oil. It has agreed to invest in a planned 60-mt refinery and petrochemicals complex in Maharashtra along with Abu Dhabi National Oil Company (ADNOC) and India’s state-run oil refiners such as Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.

“Our oil to chemicals business which has a unique combination of scale, complexity and resilience to business cycles, in partnership with Saudi Aramco, is best placed to pursue growth and value creation, while adding substantial value to the feedstock provided by our strategic partner,” Ambani noted.

RIL’s oil to chemicals business earned revenue of Rs 5.7 lakh crore in FY19 from processing 68.3 million tons (mt) of crude, clocking exports of Rs2.24 lakh crore and EBITDA OF Rs52,041 crore.

“We expect to complete these transactions within this financial year subject to due diligence, definitive agreements, regulatory and other customary approvals. The slow-down in some sectors of the economy is temporary, (but) the fundamentals of the Indian economy are very strong, opportunities will grow further with structural reforms; India has political stability; no power on earth can stop India from rising higher,” Ambani said.

During his visit to India in February, Saudi Crown Prince Mohammed bin Salman said that he expected investment opportunities worth more than $100 billion over the next two years.

 

Published on August 12, 2019
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