Saudi Aramco, a Saudi Arabian national petroleum and natural gas company, is in talks to acquire 25% stake in refining and petrochemicals businesses of Mukesh Ambani led Reliance Industries Ltd. (RIL).
Saudi Aramco is the world’s largest producer of crude oil and world’s most profitable company. It had first expressed interest in RIL’s refining and petrochemicals businesses, 4 months ago.
The discussions were taken to the next level when Crown Prince of Saudi Arabia – Mohammad bin Salman Al Saud visited India in February 2019 and had a meeting with Mukesh Ambani. Post this, the Minister of Energy, Industry and Mineral Resources of Saudi Arabia & Chairman of Saudi Aramco – Khalid A. Al-Falih attended the pre-wedding celebrations of Mukesh Ambani’s daughter – Isha Ambani. Later, he also attended the wedding ceremony of Mukesh Ambani’s son – Akash Ambani.
Goldman Sachs is advising on the proposed deal. An agreement on valuation is expected to be reached in June 2019. A minority stake could be in tune of U.S. $ 10-15 billion, valuing RIL’s refining and petrochemicals businesses at around U.S. $ 55-60 billion.
For the records, India is the world’s 3rd largest consumer of crude oil after the U.S. and China, with daily consumption in tune of 4 million Barrels Per Day (BPD). Besides, India’s crude oil consumption is expected to more than double to 10 million BPD by 2040.
It is believed RIL will create a standalone vertical for its downstream businesses – refining and petrochemicals – in which Aramco would participate. Earlier in February 2019, Saudi Aramco had said that it is planning to build a greenfield refinery, along with Indian State-oil companies, on the West Coast in Maharashtra with a capacity of 1.2 million BPD.
As a part of business diversification, the Crown Prince of Saudi Arabia wants Aramco to expand footprints outside the domestic market. In 2018, Aramco made a profit of U.S. $ 111.1 billion, which is almost double than that of Apple Inc. which gained U.S. $ 59.5 billion in 2018 and more than the combined profits of JP Morgan Chase, Google-parent Alphabet, Facebook and Exxon Mobil, which together stood at U.S.$ 106 billion.
Separately, Aramco has very recently acquired 17% stake in South Korean oil refiner, Hyundai Oil Bank for U.S. $ 1.24 billion. The investment is aimed to support Aramco’s broader downstream growth strategy. Hyundai Oil Bank has a capacity of 650,000 BPD and is located in the South-Western city of Daesan.