Reliance/Aramco deal delayed; Reliance to spin off oil-to-chemical business

India’s largest conglomerate Reliance Industries said it will be spinning its the oil-to-chemical (O2C) business into a separate entity “to facilitate multiple partnership opportunities,” said Reliance Industries Chairman/Managing Director Mukesh Ambani, speaking at the company’s AGM recently. Meanwhile, the group’s planned stake sale in the oil-to-chemical business to Saudi Aramco for US$15 billion has been delayed due to Covid-19.
“We value our two-decade relationship with Aramco and are committed to a long-term partnership,” Ambani said. However, he did not say if the deal was on track and did not give a new timeline for its completion.

Read: Reliance to carve out oil-to-chemicals assets

Reliance will be spinning off the oil-to-chemical (O2C) business into a separate subsidiary “to facilitate multiple partnership opportunities,” he said.

“We expect to complete this process by early 2021,” he said.

Ambani in August last year had announced talks for sale of 20% stake in the O2C business, which comprises of Reliance’s twin oil refineries at Jamnagar in Gujarat and petrochemical assets, to the world’s largest oil exporter, Saudi Aramco. The deal was to be concluded by March 2020 but has been delayed.

The partnership with Aramco would give Jamnagar refineries “access to a wide portfolio of value-accretive crude grades and enhanced feedstock security for higher oil-to-chemicals conversion,” he had said in the annual report.

With a stake, Aramco would not just have a share in one of the world’s best refineries and the largest integrated petrochemical complex but also access to one of the fastest-growing markets.

Besides refineries and petrochemical plants, the O2C business also comprises a 51% stake in the fuel retailing business. It, however, does not include the upstream oil and gas-producing assets such as the flagging KG-D6 block in the Bay of Bengal.

Ambani said Reliance has concluded the sale of a 49% stake in its fuel retailing venture to BP.

The O2C business will be carved out into a division where Aramco will have an economic interest. It will have its own management and accounts just like the conglomerate’s digital arm, Jio Platforms.

Reliance was to receive the proceeds from the Aramco stake sale in three stages – 50% on closing, another 25% after one year of closing and the balance 25% in the following year.