The world’s biggest exporter of crude oil, Saudi Aramco is still working on a deal to buy a $15 billion stake in the refining and chemical company of India’s Reliance Industries Ltd, even as lower oil prices are pushing it to trim investment spending.
In mid-July, the shares of Reliance dropped after its Chairman Mukesh Ambani said a deal was postponed “because of unexpected energy market circumstances and the COVID-19 situation.”
A transaction with Reliance will help the world’s biggest exporter of crude oil enter the ranks of top oil refiners and chemical makers. Saudi Aramco is currently a major crude supplier to India while Reliance sells petroleum products to the Kingdom, including gasoline.
Aramco announced that net profit for the second quarter was down nearly 75% from a year earlier on Sunday. The nearly 33% drop in oil prices in 2020 has slammed the world’s largest company. The coronavirus pandemic halted business and travel, decreasing oil and fuel demand.
The fourth-richest person in the world, Ambani had informed last year that Aramco was set to buy a 20% stake in the refining and petrochemicals business of his company, valuing it at $75 billion.
“We are still in discussion with Reliance. The work is still on and we will update our shareholders in due course about the Reliance deal.” Amin Nasser, CEO – Saudi Aramco
The Reliance deal would aid Aramco to achieve its goal of more than doubling its refining capacity to between 8 million and 10 million barrels per day; At the end of last year, the Saudi corporation had a refining capacity of 3.6 million barrels per day, including wholly-owned plants and joint venture shares. The total capacity of the facilities where Aramco has stakes was 6.4 million barrels per day.
The company is working on starting this year’s 400,000 barrel-a-day Jazan refinery on the southern Red Sea coast of Saudi Arabia. It also operates the biggest U.S. refinery and plants in countries like South Korea and Japan. Further, it is also planning many Chinese projects.
The need for a cash infusion by Reliance has eased in the last months. The Indian conglomerate raised some $30 billion by raising investments into its digital subsidiary, Jio Platforms Ltd., from the likes of Google and Facebook, and by selling shares to current stakeholders.
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“We are still in discussion with Reliance. The work is still on and we will update our shareholders in due course about the Reliance deal.”
