Aramco in advanced talks with India’s Reliance Industries on deal worth up to $25bn

With Agency Reports

 Saudi national oil firm, Aramco is in advanced talks to acquire a roughly 20% stake in Reliance Industries Ltd’s  oil refining and chemicals business for about $20 billion to $25 billion in Aramco’s shares, Bloomberg News reported on Monday.

An agreement could be reached as soon as the coming weeks, according to the report, which cited people with knowledge of the matter.

Aramco and Reliance declined to comment.

Reliance announced a sale of a 20% stake in its oil-to-chemicals business to Aramco for $15 billion in 2019, but the deal stalled after oil prices and demand crashed last year due to the pandemic.

During Aramco’s earnings briefing earlier in August, Chief Executive Officer Amin Nasser said the company was still doing due diligence on the deal.

In late June, Reliance’s billionaire chairman Mukesh Ambani said it hopes to formalise its partnership with Aramco this year and its Chairman Yasir Al-Rumayyan will join the Indian conglomerate’s board as an independent director.

Reliance shares were up 2% at 2,187.80 rupees on Monday.

Shares in Reliance extended gains to as much as 2.6% in Mumbai after the Bloomberg News report. A deal would forge a closer alliance between the world’s biggest oil exporter and one of the fastest-growing consumers. Ties and trade between the two countries have grown in recent years as India looks to bolster its energy security and Saudi Arabia reduces its support for Pakistan over the disputed  territory of Kashmir. Riyadh and New Delhi elevated their relationship to a “strategic partnership” in 2019.

It would seal more than two years of negotiations and mark Aramco’s first all-stock deal since its initial public offering in 2019. Ambani confirmed talks about a deal with an implied stake valuation of $15 billion that same year. Discussions were delayed by the onset of the coronavirus pandemic and slump in oil prices.

Energy markets have since recovered, with crude prices jumping around 35% this year to almost $70 a barrel. Aramco said last week due diligence on a deal with Reliance was underway.

A transaction would boost Aramco’s sales of crude to India. For Reliance, it would help to lock in a steady supply of oil for its giant refineries and make the Indian company a shareholder in Aramco. Based on Aramco’s market valuation of about $1.9 trillion, a transaction would give Reliance a stake of around 1%.

Details of the potential transaction are still being negotiated, and talks could drag on longer or fall apart, the people said. A representative for Aramco declined to comment. The Saudi government’s Center for International Communication didn’t immediately respond to an email requesting comment.

Saudi Goals A representative for Reliance said the company does not have anything to add beyond Ambani’s comments at the shareholders’ meeting in June, when the conglomerate appointed Aramco Chairman Yasir Al-Rumayyan to the board. Ambani had said Reliance could finalize an investment deal with the oil producer this year.

The Saudi government sold 2% of Aramco in the IPO, raising almost $30 billion. It’s still the largest first-time share sale on record. Aramco’s Reliance Deal Would Lock In India Revenue Source: React Crown Prince Mohammed bin Salman, the de facto ruler, said in April that the kingdom was in talks to sell a 1% stake in Aramco to a “leading global energy company.” He didn’t disclose which one.

“This deal could be very important in strengthening Aramco’s sales in the country where this company resides,” the prince had said. Saudi Arabia shipped 613,000 barrels a day of crude to India in July, around 10% of its total exports.

The transaction would help Aramco reach its goal of more than doubling refining capacity to between 8 million and 10 million barrels of crude a day. The Saudi firm had 3.6 million barrels a day of capacity at the end of last year, including stakes in joint ventures.

As reported  in  June  by Reuters,  Reliance Industries Ltd  said  it hoped to formalise its partnership with Saudi Aramco  this year and its Chairman Yasir Al-Rumayyan will join the Indian conglomerate’s board as an independent director.

“Al-Rumayyan joining our board is also the beginning of internationalisation of Reliance,” Chairman Mukesh Ambani told shareholders.

Reliance had announced a sale of a 20% stake in its oil-to-chemicals business for $15 billion in 2019 to Aramco, the world’s top oil exporting firm. However, the deal stalled after oil prices and demand crashed last year due to the pandemic.

Saudi Aramco , officially the Saudi Arabian Oil Company (formerly Arabian-American Oil Company), is a Saudi Arabian public petroleum and natural gas company based in Dhahran.

 As of 2020, it is one of the largest companies in the world by revenue. Saudi Aramco has both the world’s second-largest proven crude oil reserves, at more than 270 billion barrels (43 billion cubic metres), and largest daily oil production of all oil producing companies.The company  operates the world’s largest single hydrocarbon network, the Master Gas System.

Reliance Industries Limited (RIL) is an Indian multinational conglomerate company, headquartered in Mumbai, India. RIL’s diverse businesses include energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles.

 Reliance is one of the most profitable companies in India, the largest publicly traded company in India by market capitalisation, and the largest company in India as measured by revenue after recently surpassing the government-controlled Indian Oil Corporation. It is also the eighth largest employer in India with over 236,000 employees. RIL has a market capitalisation of 186 billion as of March 2021.

With agency reports : Bloomberg/Reuters,CBCN