India's Reliance to sell stake in refining unit to Saudi Aramco

Reliance Industries chairman Mukesh Ambani, with wife Neeta, at the company's annual general meeting in Mumbai yesterday. The businessman said the company has agreed to sell a 20 per cent stake in its oil refinery and chemical unit to Saudi Aramco in
Reliance Industries chairman Mukesh Ambani, with wife Neeta, at the company's annual general meeting in Mumbai yesterday. The businessman said the company has agreed to sell a 20 per cent stake in its oil refinery and chemical unit to Saudi Aramco in a deal worth US$15 billion (S$20.82 billion). PHOTO: ASSOCIATED PRESS

MUMBAI • The world's biggest crude producer will soon own a part of the world's biggest oil refinery.

The head of India's Reliance said yesterday it has agreed to sell a 20 per cent stake in its oil refinery and chemical unit to Saudi Aramco in a deal worth US$15 billion (S$20.82 billion).

"This is the biggest foreign investment in the history of Reliance and also among the largest foreign investments ever in India," India's richest man Mukesh Ambani said at the company's annual general meeting in Mumbai.

The preliminary deal is based on a valuation of US$75 billion for Reliance's Oil to Chemicals division comprising the refining, petrochemicals and fuels marketing businesses of the Indian firm, according to a Reliance statement.

The move is the latest in a spree of Aramco refinery investments as the company plans to double its processing network to handle as much as 10 million barrels a day by 2030, locking in friendly buyers for the kingdom's crude.

As part of the deal, Reliance will agree to a long-term purchase of 500,000 barrels of crude a day from Aramco for its Jamnagar refinery, the world's largest, which to date has processed some two billion barrels of Saudi crude.

"This signifies perfect synergy between the world's largest oil producer and the world's largest integrated refinery and petrochemicals complex," Mr Ambani told Reliance shareholders.

"Now we have transformed our longstanding relationship of two decades, based on mutual trust, into a partnership of growth potential for many more years," he said.

The deal should be completed by March and is subject to due diligence, definitive agreements and regulatory and other approvals, Mr Ambani said.

He did not say how the deal would be structured.

Reliance has been selling assets from mobile-phone towers to oil and gas fields to reduce leverage that has risen over the past few years as it poured money into new sectors such as telecommunications. The Indian conglomerate's debt stood at US$32 billion at the end of December, data compiled by Bloomberg show.

Mr Ambani met Saudi Energy Minister Khalid Al-Falih in December to discuss opportunities for joint investments in petrochemical, refining and communications projects, according to a tweet from the latter at the time.

The Indian businessman has been targeting refining deals in India since at least last year, when chief executive officer Amin Nasser told reporters that the firm wanted to double capacity to produce petrol and other fuels.

The Saudi state-owned energy giant said yesterday its first-half net income for 2019 had slipped nearly 12 per cent to US$46.9 billion, a first such disclosure for the secretive company ahead of its debut earnings call.

The fall in revenue - owing to lower oil prices - was reported amid renewed speculation the company was preparing for its much-delayed overseas stock listing, dubbed potentially the world's biggest.

Saudi Arabia plans to sell up to 5 per cent of the world's largest energy firm and hopes to raise up to US$100 billion.

The planned listing forms the cornerstone of a reform programme envisaged by Prince Mohammed Bin Salman to wean the Saudi economy off its reliance on oil.

BLOOMBERG, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on August 13, 2019, with the headline 'India's Reliance to sell stake in refining unit to Saudi Aramco'. Print Edition | Subscribe