Sector News

Aramco in talks to acquire up to 25% of Reliance’s refining, petchems business

April 18, 2019
Energy & Chemical Value Chain

Saudi Aramco, fresh from a deal to acquire a stake in Hyundai Oilbank (Seoul, South Korea) for $1.25 billion, is in serious discussions with Reliance Industries (Mumbai, India) to acquire up to 25% in Reliance’s refining and petrochemicals business, according to local press reports. The Times of India said today that Goldman Sachs has been mandated to advise on the proposed deal. Reliance’s business that Aramco is reportedly eyeing is valued at around $55–60 billion and a minority stake could raise around $10–15 billion. An agreement on the valuation is expected around June this year, the Times of India says, citing sources with knowledge of the development.

According to other reports, Reliance is seeking a higher valuation of upwards of $80 billion for the division and it has also initiated discussions very recently with Abu Dhabi National Oil Co. (Adnoc) to become a potential partner.

Reliance declined to comment on the reports saying that as a policy, it does not comment on media speculation and rumors. “Our company evaluates various opportunities on an ongoing basis,” the company said in response to the report. Reliance has been diversifying into businesses unrelated to petchems, including telecoms and retail, and a spin-off of refining and petchems would provide greater focus to that business. Reliance is India’s second-largest oil refiner after Indian Oil, and its most profitable company with 2018 profit before tax of its refining, oil and gas, and petchems segment of $6.6 billion.

Talks of collaboration between Aramco and Reliance first surfaced in December when Saudi Energy Minister Khalid al-Falih met with Reliance’s chairman Mukesh Ambani and tweeted that the two companies have discussed collaboration and joint investment opportunities. Falih was attending the wedding of Ambani’s daughter. Discussions between the two companies intensified in February following the visit to India by Saudi Crown Prince Mohammed bin Salman.

Aramco recently sealed a deal to acquire a 70% stake in Sabic for $69.1 billion as it continues to expand its downstream operations. It said that in addition to the Sabic deal, it has allocated around $100 billion for acquisitions to further beef up this business.

Reliance Industries is India’s largest private-sector petchems producer. Its two oil refineries at Jamnagar, Gujarat State, India, have a combined capacity to process 1.4 million b/d of crude oil, and the company has set a target to raise capacity by a further 600,000 b/d. It is also planning to build another steam cracker at Jamnagar following recent completion of a 1.5-million metric tons/year ethylene plant at the site. Saudi Aramco is also a partner in a proposed $44-billion refinery and petchems complex in the state of Maharashtra.

By Natasha Alperowicz

Source: Chemical Week

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