Aramco to take 20 per cent in Reliance's refinery, chemical business at USD 75 billion enterprise value
MUMBAI: In India’s largest foreign direct investment (FDI) deal, Reliance Industries Ltd. (RIL) on Monday announced that it has agreed to sell a strategic stake in its oil to chemicals business to global oil giant Saudi Aramco. According to RIL chairman Mukesh Ambani, Aramco has agreed to pick up a 20 per cent stake in the division whose enterprise value is pegged at $75 billion.
RIL’s oil to chemicals business would include all its refining and petrochemicals assets, and the petroleum retail chain in which BP recently took a 49 per cent stake.The Aramco and BP deals are seen part of a major de-leveraging exercise by the conglomerate after analysts began flagging concerns over its growing debt. BP would pay Rs 7,000 crore for its stake, with both investments together set to bring in Rs 1.1 lakh crore, Ambani told shareholders at the company’s 42nd Annual General Meeting (AGM).
Aramco will also supply up to 500 kbpd of crude oil on a long term basis to RIL’s Jamnagar refinery under the agreement. The Jamnagar refinery, with a processing capacity of 1.24 mpbd, one of the largest and most complex such units in the world, is also future ready to transform from being a leading producer of fuels to chemicals, Ambani said. “As the world moves towards renewable energy sources and electric vehicles, Reliance has positioned itself far ahead of the curve to create new value,” he said.
The roadmap in RIL’s oil to chemical mission aims to convert greater than 70 per cent of crude oil refined in Jamnagar into commercially competitive chemical building blocks, RIL had said in its annual report. “The Jamnagar refinery product slate, at the culmination of oil-to-chemical transition, shall be only jet fuels and petrochemicals. All refined products priced below crude shall be eliminated for chemicals at the initial stage. Final fuel de-risking shall target elimination of gasoline, alkylate and diesel,” the company had said.
Large scale deleveraging
Ambani also told shareholders that the company would try to become a zero debt entity at the net level within 18 months, and then try to pay higher dividends, periodic bonus issues etc., Currently, RIL’s net debt stands at Rs 1.54 lakh crore, and gross debt at Rs 2.88 lakh crore.
Though Ambani did not spell out the details of how the Aramco deal would be structured, since RIL also operates telecom and retail businesses, he said efforts are on to bring in partners for these two and move towards listing within five years.
The oil to chemicals business, meanwhile, is likely to be carved out but kept within RIL fold for now. Once the due diligence and approval process is over, RIL is likely to issue shares to Aramco in some form to match its 20 per cent economic interest in the unit.