Reliance, Aramco deal delayed further

State-controlled Saudi Aramco's planned purchase of a 20pc stake in Indian private-sector conglomerate Reliance Industries' (RIL) refining and petrochemical assets is facing further delays.

"Due to unforeseen circumstances in the energy market and the Covid-19 situation, the deal has not progressed according to the original timeline," RIL chairman Mukesh Ambani said today, without giving more details. "Our equity requirements have already been met."

RIL had planned to offload a stake in its oil-to-chemical (O2C) business to reduce its overall debt, which was incurred to expand its oil business, and after investing in retail and telecom ventures.

It is not clear if the deal will still go ahead. "RIL values our over two-decade relationship with Saudi Aramco and is committed to a long-term partnership," Ambani said. RIL's capital needs were met by 14 investors led by Facebook and Google, which together invested 1.52 trillion rupees ($20bn).

RIL will approach the government for permission to spin off its O2C business into a separate subsidiary to help facilitate any partnership opportunities. Other investors besides Aramco are interested in the O2C business, a company official said, without giving details.

RIL expects to complete the spin-off by early 2021. The O2C business will also own the fuel retail joint venture established between RIL and BP this month.

BP paid $1bn to RIL for a 49pc stake in the joint venture, with RIL holding 51pc. The venture, RBML,will expand its fuel retail network to 5,500 over the next five years from more than 1,400 retail sites now and aims to increase its presence from 30 to 45 airports.

RIL said in August last year that the deal with Aramco, which values RIL's oil and chemical divisions at $75bn including debt, would be concluded by 31 March 2020. It later said the deal would be delayed beyond March.

The Aramco investment covers all of RIL's refineries and petrochemical assets, including its 51pc stake in the retail joint venture with BP. Aramco will supply 500,000 b/d of crude to RIL's 1.36mn b/d Jamnagar refining complex as part of the arrangement.

Ownership in India's downstream sector is poised for further change, with the government planning to sell a 54pc controlling stake in state-controlled refiner Bharat Petroleum (BPCL). Saudi Arabia's participation has been sought in the proposed sale. It is unclear if RIL will bid for BPCL.

There is also uncertainty over the planned 1.2mn b/d refinery and petrochemicals project in Maharashtra state, which is expected to cost over $55bn. Aramco and Abu Dhabi's state-owned Adnoc have a 50pc share in the project, the agreement for which expires this year.

RIL's gross refining margins rose to $8.90/bl in the January-March quarter from $8.20/bl a year earlier but fell from $9.20/bl in the preceding quarter. The company's 1.36mn b/d Jamnagar refinery processed 1.47mn b/d in January-March from 1.29mn b/d a year earlier.