September 12, 2019
Saudi Aramco’s potential 20% stake is based upon an enterprise Value of US$75 billion for the oil-to-chemicals division of Reliance Industries
The stake worth US$15 billion is one of the largest foreign investments made in India, and comes amid going confidence in the nation’s economy
Aramco is the world’s lowest cost-per-barrel producer of crude oil and is a major fuel supplier to India, with expanding bilateral partnership
Reliance's Jamnagar refining complex produces mostly for export, going ahead the facility will be producing jet fuel and petrochemicals
In one of the largest foreign investments made in India, the world’s biggest oil producer, Saudi Aramco, has signed a Letter of Intent to acquire a 20 per cent stake in the oil-to-chemicals (O2C) division of the world’s largest oil refinery at Jamnagar, Gujarat, run by Reliance Industries. Saudi Aramco’s potential 20 per cent stake is based upon an enterprise value of US$75 billion for the O2C division, making the stake worth US$15 billion. An announcement on the deal was made on August 12.
Saudi Aramco is the world’s largest and lowest cost-per-barrel producer of crude oil, is geographically close to India, and offers a wide range of crude supply options. To date it has supplied around 2 billion barrels of crude oil for processing at Jamnagar, Gujarat. At the same time, 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 500,000 barrels per day of Arabian crude oil to Jamnagar refinery on a long term basis.
The Jamnagar refining complex produces mostly for export, and is shifting toward producing only jet fuel and petrochemicals. At present, the refinery complex sources about one-quarter of its 1.4 million barrels a day of crude throughput from Saudi Arabia and the United Arab Emirates together, equivalent to about 350,000 barrels each day. As part of the deal, Aramco will be selling 500,000 barrels per day of crude to the plant.
India is likely to soon overtake the U.S. as the world’s biggest net importer of crude oil. The announcement is an assertion of confidence in the Indian economy and investor environment, and is sure to strengthen bilateral trade between India and the Middle East.