Saudi Aramco signed a letter of intent for a proposed purchase of a 20% stake in the oil-to-chemicals (O2C) business of India’s Reliance Industries Ltd., including the 1.24 million barrels-a-day Jamnagar refining complex on the country’s west coast.
Reliance values its oil-to-chemicals division at $75 billion including debt, implying a $15 billion valuation for the stake.
The move is part of Aramco’s refinery investments spree as the company plans to double its processing network to handle as much as 10 million barrels a day by 2030. As part of the deal, Reliance will agree to a long-term purchase of 500,000 barrels of crude a day from Aramco.
With this deal, Reliance Industries Ltd is looking to turn debt free in the next 18 months which it accumulated in the past few years as it poured money into new sectors such as telecommunications. As part of the debt-reduction plan, RIL is also looking to find global partners for its retail and telecom businesses. The company also plans to unlock value in real estate and financial investments. The Indian conglomerate’s debt stood at $32 billion at the end of December.
“Saudi Aramco and Reliance have agreed to form a long-term partnership in our oil-to-chemicals (O2C) division. In terms of the understanding between the parties, Saudi Aramco will invest in Reliance for a 20 per cent stake at an enterprise value of $75 billion for the O2C division,” Mukesh Ambani, chairman and managing director (CMD), RIL, informed shareholders.
