Reliance Industries and Saudi Aramco have agreed to a non-binding letter of intent regarding a proposed investment in Reliance's oil to chemicals division comprising refining, petrochemicals and fuels marketing.
Saudi Aramco's potential 20% stake is based up the division having an enterprise vale of $75 billion. As a result, this would be one of the largest foreign investments ever made in India.
The terms of the deal are yet to be finalised but according to Wood Mackenzie, company officials have said that Reliance will get roughly $!5 billion, including some debt adjustments.
For more than 25 years both companies have had a long-standing crude oil supply relationship. Saudi Aramco has supplied 2 million barrels of crude oil for processing at Reliance's refinery at Jamnagar. The company says the Jamnagar refinery is the largest and most complex 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 bpd of Arabian crude oil to the Jamnagar refinery on a long-term basis.
Mukesh Ambani, chairman and managing director of Reliance Industries, says: 'I am truly delighted to welcome Saudi Aramco, one of the largest business enterprises in the world, as a potential investor in our oil to chemicals division.
'We have a long-standing crude oil relationship with Saudi Aramco, and we would be happy to see this further strengthened with this investment. Saudi Aramco's interest is a strong endorsement of the quality of our assets and operations as well as of the potential of India.'
Wood Mackenzie's vice president refining and chemicals Alan Gelder says: 'The deal is further evidence that Saudi Aramco is executing on its long-term strategy to increase its refining and petrochemical capacity. This strategy is being achieved through a combination of projects and acquisitions.
'Saudi Aramco continues to show keen interest in accessing the Indian market, which has the strongest long-term growth prospects. Aramco is also demonstrating discipline in targeting strongly competitive assets that are well placed, through petrochemical integration, to be sustainable through the energy transition.'
The parties will make an announcement one a definitive agreement is executed.
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