Aramco is in Talks to Invest $15 Billion in RIL

The world’s largest crude oil producer – Saudi Aramco is still in talks about a deal to buy a $15 billion stake in the oil-to-chemicals (O2C) business of Reliance Industries Limited (RIL). “We are still in discussions with Reliance,” Amin Nasser, CEO, Aramco. He adds, “The work is still on. We will update our shareholders in due course about the Reliance deal”. While Aramco reported a 50 percent drop in net income for six long months till 30 June, RIL had announced plans to sell a 20 percent stake in its O2C business to Saudi Aramco as a part of its deleveraging exercise during last fiscal. But this July, RIL’s Chairman & Managing Director – Mukesh Ambani revealed that the deal has not progressed as per the prefixed timeline due to unforeseen circumstances in the energy market.

“Nevertheless, we at Reliance value our over two-decade-long relationship with Saudi Aramco and are committed to a long-term partnership. We will approach the NCLT (National Company Law Tribunal) with our proposal to spin off our O2C business into a separate subsidiary to facilitate this partnership opportunity. We expect to complete this process by early 2021,” revealed Ambani at the company’s annual general meeting on 15 July.

Lately, Saudi Aramco said its net income plunged to $23.2 billion in the first half of 2020, down by half from $46.9 billion over the same period in 2019. The company also reported a 73.4 percent fall in second-quarter net profit and said it expected capital expenditure for 2020 to be at the lower end of a $25 billion to $30 billion range. “Strong headwinds from reduced demand and lower oil prices are reflected in our second-quarter results,” asserts Nasser.

The covid-19 pandemic has resulted in substantial reductions in consumer and business activity and significantly reduced demand for crude oil, natural gas and petroleum products, thereby delaying the Aramco’s deal with RIL. The RIL board had this April approved a scheme of arrangement for transfer of O2C undertaking of the company to Reliance O2C Limited. The O2C undertaking of the company comprises of refining, petrochemicals, fuel retail and aviation fuel, and bulk wholesale marketing businesses together with its assets and liabilities.

RIL has also laid out a 15-year vision for itself to build a new energy company whose focus will be to recycle carbon dioxide, create value from plastic, and build clean and affordable energy with hydrogen, wind, solar, fuel cells and battery. RIL aims to become net carbon zero by 2035.

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