Aramco asks for revised Reliance deal; Wants price to be reconsidered

Talks regarding the deal between Saudi Aramco and the oil-to-chemical company of Reliance Industries Ltd have been halted over price, sources familiar with the matter said.

The world’s largest company was set to buy a 20% stake in the Indian firm.

With the energy market hit by falling crude demand due to COVID-19, Aramco wants the Indian conglomerate to review last year’s $15 billion that it agreed to sell the stake, the sources said.

“Aramco has told Reliance that refining margins are terrible and are expected to remain subdued in Q3 at least, so they can’t pay the price they have agreed pre-COVID,” according to the sources.

It is highly likely that Reliance will wait for the market to rebound, rather than settle for a “drastic” asset revaluation.

The proposed deadline for the agreement was March 2020.

Earlier this week Mukesh Ambani, the chairman of Reliance had informed the shareholders that the deal had been delayed due to the unexpected circumstances brought about by the COVID-19 pandemic and the energy market.

However, Mr. Ambani clarified his intentions to remain committed to a long-term partnership with Aramco.

Aramco, the largest oil-exporting company in the world has been affected by the pandemic and has witnessed its revenue fall much like all the other global players. To be able to pay shareholder dividends in the range of $75 billion this year, it had to extend the $69.01 billion payment plan for a 70% stake in SABIC by three years to 2028.

Reliance runs the world’s largest refining complex in Western India and had intended to use the Aramco transaction proceeds to clear a portion of its multi-billion-dollar debt.

Meanwhile, Reliance has raised funding for its digital network Reliance Jio from companies including Google, Facebook, Intel and Qualcomm, helping it become net-debt free.

Reliance remained committed to a long-term relationship with Aramco and expects the deal to be completed by 2021. To promote the partnership Reliance would turn its oil-to-chemical business into a separate subsidiary.

Global companies have also approached Reliance for strategic partnerships in their petrochemical business, Ambani said.