Aramco still eyeing $20.6b deal with India's Reliance

Aramco's logo at a conference centre in Dhahran, Saudi Arabia, last year. The Saudi firm plans to buy a stake in Reliance Industries' refining and chemicals business, to reach its goal of more than doubling its refining capacity. PHOTO: REUTERS

DUBAI • Saudi Aramco said it is still working on a deal to buy a US$15 billion (S$20.6 billion) stake in Reliance Industries' refining and chemicals business, even as lower oil prices force it to slash investment spending.

Mumbai-based Reliance's shares fell in the middle of last month after chairman Mukesh Ambani said a transaction had been delayed "due to unforeseen circumstances in the energy market and the Covid-19 situation".

A deal with Reliance would help the world's biggest crude exporter join the ranks of the top oil refiners and chemical makers.

State-owned Aramco, which bought chemical firm Saudi Basic Industries Corp for US$70 billion this year, is already a major supplier of crude to India, while Reliance sells petroleum products to the kingdom.

"We are still in discussion with Reliance," Aramco chief executive officer Amin Nasser said on a call with reporters on Sunday. "The work is still on. We will update our shareholders in due course."

Aramco reported on Sunday that second-quarter net income was down almost 75 per cent from a year earlier. The coronavirus pandemic halted travel and business, slashing demand for crude and fuel.

After the Organisation of Petroleum Exporting Countries cut production, Brent prices rebounded from a low of about US$16 a barrel in April to nearly US$45, though they are still down 32 per cent this year.

Aramco's downstream unit narrowed its loss in the second quarter. The loss before interest and taxes for the business was US$344 million, compared with US$866 million a year earlier.

Mr Ambani, the world's fourth-richest person, said last year that Aramco was set to buy a 20 per cent stake in his company's refining and petrochemicals business, valuing it at US$75 billion.

The Reliance transaction would help Aramco reach its goal of more than doubling refining capacity to between eight million and 10 million barrels a day.

The Saudi firm had a refining capacity of 3.6 million barrels a day at the end of last year, including wholly owned plants and stakes in joint ventures. The gross capacity of facilities in which Aramco has stakes was 6.4 million barrels daily.

The company is working to start the 400,000 barrel-a-day Jazan refinery on Saudi Arabia's southern Red Sea coast this year. It also owns the biggest refinery in the United States as well as plants in countries such as South Korea and Japan.

It is planning several Chinese ventures. Reliance's need for a cash infusion has eased in recent months.

The conglomerate raised some US$30 billion by attracting investments from the likes of Google and Facebook into its digital unit, Jio Platforms, and by selling shares to existing stakeholders.

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A version of this article appeared in the print edition of The Straits Times on August 11, 2020, with the headline Aramco still eyeing $20.6b deal with India's Reliance. Subscribe