Saudi Aramco’s plan to buy $15-billion stake in Reliance Industries hydrocarbon business may not go through due to the rising risk of collapsing oil prices, US-based brokerage Bernstein has warned.
The unique combination of excess crude oil global supply, 30% drop in demand due to coronavirus crisis and continuous price fall weighed heavily on Aramco’s investment plans.
“With the collapse in oil prices, the risk is rising that the deal will not go has increased although we now value downstream at $55 billion gross, which is a 20% discount to Aramco valuation,” Bernstein said in a report on Wednesday.
Last August, Saudi Aramco entered into a non-binding initial agreement to buy 20% stake in Reliance Industries’ oil to chemicals divisions with an enterprise value of $75 billion. The oil to chemicals division included RIL’s Jamnagar refining complex, petrochemicals and fuels marketing businesses.
Apart from Reliances oil to chemicals business, Aramco also agreed last year to buy the controlling stake in SABIC from the kingdom’s wealth fund for $69.1bn, sealing one of the biggest-ever deals in the global chemical industry.