Reliance eyes higher valuation for refining arm in likely Aramco deal
Mukesh Ambani’s Reliance Industries Ltd (RIL) has sought a higher valuation for its refining and petrochemicals business as it considers selling a minority stake to Saudi Arabia’s state energy group, Saudi Aramco, said two officials directly aware of the development, requesting anonymity.
On Wednesday, The Times of India reported that Saudi Aramco is in talks with RIL to buy up to a 25% stake in its refining and petrochemicals business. A minority stake sale could fetch $10-15 billion, valuing the business at $60 billion, the report added. The petrochemical and refining business contributes 75% to RIL’s operating profit.
“Saudi Aramco wants to buy 25% stake, but RIL is ready to offer less than that. There are differences over the valuation,” said the first official mentioned above.
While Saudi Aramco declined to comment on the development, RIL said: “As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis.”
Aramco, the world’s largest crude producer, has been keen on entering India since 2016. Last June, Saudi Aramco and the Abu Dhabi National Oil Co. had signed an MoU to jointly develop and build a $44 billion integrated refinery and petrochemicals complex at Ratnagiri in Maharashtra.
The Ratnagiri project has seen unprecedented delays after farmers refused to give up their land for the project. Subsequently, in February, the state government decided to shift the project from coastal Ratnagiri to neighbouring Raigad district. The project was aimed at giving India steady fuel supplies, while providing Saudi Arabia with a regular buyer for its oil. An oil marketing company official said Saudi Aramco’s deal with RIL will not impact the Ratnagiri Refinery and Petrochemicals project.
In 2016, Saudi Aramco was also looking to pick up a 25% stake in ONGC Petro-additions Ltd (OPaL), which is promoted by Oil and Natural Gas Corp. Ltd (ONGC) and co-promoted by Gail India and Gujarat State Petroleum Corp. (GSPC) and other international petrochemical companies. “The concern around petrochemical comes from the current high paraxylene prices, where high capacity additions are expected in China in end-CY19. Lower paraxylene prices may impact margins for other polyester products, too. The concerns on refining are: High refining capacity additions over 2019 and 2020, with capacity addition of nearly 3 million barrels of oil per day over two years,” said Credit Suisse in a report dated 10 April.