Reliance and Aramco ink mega deal

Saudi Aramco and Reliance Industries Limited (RIL) have agreed to a non-binding Letter of Intent (LoI).

The LoI is regarding a proposed investment in the Oil to Chemicals (O2C) division of Reliance comprising the Refining, Petrochemicals and fuels marketing businesses of RIL. Saudi Aramco’s potential 20 per cent stake is based upon an Enterprise Value of US$75 billion for the O2C division. This would be one of the largest foreign investments ever made in India.

Saudi Aramco and RIL have a long-standing crude oil supply relationship of over 25 years. Saudi Aramco is the world’s largest and lowest cost-per-barrel producer of crude oil and is geographically close to India and offers a wide range of crude supply options. To date it has supplied approximately 2 billion barrels of crude oil for processing at RIL’s refinery at Jamnagar.

RIL’s Jamnagar refinery is the largest and most complex refinery in the world, with deep integration of refining and petrochemical activities across multiple manufacturing facilities. The proposed investment would result in Saudi Aramco supplying 500 KBPD of Arabian crude oil to the Jamnagar refinery on a long term basis.

Reliance Industries is planning to produce only jet fuel and petrochemicals at its mega Jamnagar refinery complex as it implements an oil-to-chemical strategy. This will help the company to eliminate most fuels it produces in favour of high value products.

The shares of Reliance would be in focus on Tuesday as the markets were closed on Monday on accounts of Eid-al-adha.