Saudi Aramco to invest in India’s Reliance; take up Shell’s stake in Saudi jv

State-owned oil/gas company Saudi Aramco has been reported to be in talks to buy a stake of between 20 to 25% in the refining and petrochemicals businesses of India’s Reliance Industries. In related news, Aramco is said to be planning to buy Royal Dutch Shell’s 50% stake in the partners’ Saudi refining complex Saudi Aramco Shell Refinery Co (SASREF) in Al Jubail.

The news comes after Aramco took  plans to boost investments in refining and petrochemicals to secure new markets for its crude, and sees growth in chemicals as central to its downstream strategy to lessen the risk of a slowdown in oil demand.

In terms of the Reliance stake, if the deal went ahead, it could mean a boost in Aramco’s crude oil supply to Reliance by possibly more than 50%, says Reuters.

The Times of India reported earlier that Aramco was in talks to buy a stake of up to 25%, which could be worth around US$10-15 billion, valuing the Indian company’s refining and petrochemicals businesses at some US$55-60 billion, says Reuters.

Reliance, controlled by Asia’s richest man, Mukesh Ambani, is India’s biggest refining and petrochemicals company and runs a 1.4 million barrels/day refining complex at Jamnagar in western India. It plans to expand capacity to 2 million barrels/day by 2030, according to plans shared with the Indian government.

Last year, Aramco and the United Arab Emirates’ national oil company ADNOC teamed up with state-run Indian refiners in a plan to build a 1.2 million barrels/day refinery and petrochemical project in Maharashtra state.

However, the planned refinery, which was initially expected to cost US$44 billion, has faced delays, as thousands of farmers have refused to surrender land for it and the Maharashtra government is looking to move the plant’s location.

Meanwhile, SASREF, based in Jubail Industrial City in Saudi Arabia, has a crude oil refining capacity of 305,000 barrels/day. It is also part of Shell’s plans to divest its businesses and it has sold over US$30 billion of assets in recent years as it shift its focus to lower carbon businesses such as natural gas and petrochemicals.

According to Reuters, an agreement has been reached for the above sale by both the companies, citing a source.