Reliance/Aramco refinery sale reaches a stalemate

India’s Reliance Industries and state-owned oil/gas giant Saudi Aramco who have been in discussions for the latter to acquire a minority stake in Reliance’s refining assets have hit a roadblock over the valuation and structure of the deal, according to a Reuters report.

Aramco plans to boost its investment in refining and petrochemicals and to secure new markets for its crude and sees growth in chemicals as central to its downstream strategy to reduce risk as oil demand slows.

Reliance has been in talks offering Aramco at least 20% in a special purpose vehicle covering refining, petrochemicals and marketing, and with a focus on expansion.

According to the report, Reliance has been quoted as asking for a higher valuation and wants to transfer debt of the holding company to the new special purpose vehicle.

Conglomerate Reliance’s debt increased 20% over the past year as it spent US$36 billion to disrupt India’s wireless market with cheap data and free calls, forcing rivals to combine or exit.

Canadian alternative asset manager Brookfield Asset Management Inc. is investing US$3.7 billion to acquire a stake in an investment trust that will manage the mobile-phone tower business of Reliance.

Earlier this year, Brookfield agreed to buy a pipeline from Ambani for US$1.9 billion, while in 2018, a Reliance unit sold its stake in some Eagle Ford Shale acreages in the US to Sundance Energy Inc for about US$100 million.

Reliance also operates the world’s biggest refining complex with capacity to process 1.4 million barrels per day (bpd) of oil at Jamnagar in western India.

It plans to expand capacity to 2 million bpd by 2030, according to plans shared with the Indian government.

Aramco and the United Arab Emirates’ national oil company ADNOC teamed up with state-run Indian refiners last year in a plan to build a 1.2 million bpd refinery and petrochemical project in India’s Maharashtra state.

But the planned refinery, initially expected to cost US$44 billion, faces delays, as farmers have refused to surrender land forcing the Maharashtra government to find a new location in Raigad district, about 100 km south of Mumbai.

Aramco is also restarting preparations for a potential public offering, months after putting the planned listing on hold, according to industry sources. The oil giant recently held talks with a select group of investment banks to discuss the potential share sale, the sources said.