Aramco-Reliance Pact Stay Unaffected, Regardless of India-Saudi Oil Stand-off

The stand-off between India and Saudi Arabia intensifies with the kingdom swelling the crude oil price for Asia as well as India cutting imports from the Gulf nation. However, the state-run Saudi Aramco's stake purchase plan in Reliance O2C Ltd remains unaffected, says the sources aware of the advancement.

Aramco is keen on partnering with Reliance and the discussions are progressing as expected, according to the close sources.

The world's largest oil producing company, Aramco is likely to record a strong performance in this year, credits to the spike in crude prices.  Yet, the Brent crude price is hovering across $65 per barrel, in comparison with $38 in early November. However, the Bank of America (BoA) earlier estimated that Aramco would generate close to $100 billion in cash flow in 2022.

Furthermore, Aramco is also producing surplus cash as it recently agreed to sell its 49 percent stake in pipelines to a group led by US-based EIG Global Energy Partners for $12.4 billion. It is Aramco's largest deal since it registering $29.4 billion IPO in late 2019.

In 2020, the energy giant had posted a 44.4 per cent slump in net profit due to lower crude prices, as the coronavirus pandemic weighed heavily on global demand. Aramco obtained a net income of $49 billion in 2020, down from $88.2 billion in 2019.

India, being the third-largest crude oil importer and consumer, lately, advised public sector crude refining companies to scale up import from the US and Africa following Saudi Arabia's decision to raise official selling price (OSP) of oil shipments to Asia in May. The action by Saudi, the world's largest crude exporter, was largely conceived as a retaliation to India's plan to cut crude imports from the country.

Mukesh Ambani, Chairman and Managing Director of Reliance Industries, announced in 2019 that Aramco would pick up 20 per cent stake in the company's newly floated subsidiary Reliance O2C for $15 billion. Aramco sees Reliance O2C as a dedicated buyer of its crude. Besides, it sees opportunity in Reliance O2C's plan to increase production of petrochemicals by reducing fuel output.

The O2C business of Reliance includes the match refineries in Gujarat's Jamnagar and the adjacent petrochemicals complex, along with  the petroleum retail joint venture of RIL-BP Plc.