Reliance, Aramco shelve oil to chemicals deal

India's Reliance Industries (RIL) and Saudi state-controlled Aramco have opted to shelve a multi-billion dollar plan that would see the latter take a 20pc stake in RIL's oil and chemicals business.

The pair signed a "non-binding Letter of Intent" in August 2019 for the sale, but RIL released a statement over the weekend saying the deal had been withdrawn as the private-sector Indian conglomerate shifts its focus to renewables.

"Due to evolving nature of Reliance's business portfolio, Reliance and Saudi Aramco have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in O2C [oil-to-chemicals] business in light of the changed context," RIL said in a 19 November statement.

As a result, the application to separate the business into a new entity for Aramco to take its stake was withdrawn.

The oil-to-chemicals business comprises RIL's 1.4mn b/d refinery complex at Jamnagar and 38.4mn t/yr of petrochemicals capacity. More than 60pc of the refinery's output is earmarked as feedstock for the petrochemicals business.

When the deal with Aramco was first announced, RIL valued its refining and chemicals operations at $75bn including debt, implying a $15bn valuation for Aramco's 20pc stake.

Aramco chairman, Yasir al-Rumayyan, who is also governor of Saudi Arabia's Public Investment Fund (PIF), was named as an independent director on the RIL board in June. Completing the O2C deal would have offered Aramco's clout and expertise to allow RIL to expand into foreign markets.

Despite dropping Aramco's stake plan, RIL said it will remain Aramco's preferred partner for investments in India's private sector and will collaborate with the Saudi energy giant on investments in the kingdom.

RIL committed to become net carbon zero by 2035 and hopes to recast itself as a clean energy enterprise with the development of the $8.2bn Dhirubhai Ambani Green Energy Giga Complex at Jamnagar. The plan involves building four plants — an integrated solar photovoltaic module factory, an energy storage battery plant, an electrolyser factory to produce green hydrogen and a fuel cell plant.

By Adal Mirza