Saudi Aramco gets closer to picking up a stake in Reliance O2C

The proposed deal between Saudi Aramco and Reliance was first announced at the 42nd AGM of Reliance Industries in 2019. Reliance was supposed to sell 20% in its Oil-to-Chemicals (O2C) business for $15 billion. However, things changed with the onset of the COVID pandemic.

Once COVID became an international pandemic, oil prices crashed as lockdowns resulted in weak oil demand. Brent dipped as low as $15/bbl due to weak demand. At that point of time, Saudi Aramco demanded a lower valuation, which Reliance was not agreeable to.

In the last few months, crude is back at $70/bbl and the deal is once again in focus. The deal was almost a certainty when Yasir Al Rumayyan of Saudi Aramco was given a seat on the RIL board at the 44th AGM in 2021.

Check: Reliance AGM 2021

It now looks like the finer points of the deal would be closed soon. Aramco is likely to pick up a 20% stake in Reliance O2C for $20-$25 billion via a stock swap. RIL will get shares of Aramco in exchange for the stake and the final word is expected soon.

What does the deal hold for Saudi Aramco? Aramco exports 6 million bpd of crude with 10% or a little over 6 lakh bpd going to India. For Saudi Aramco, India has always been a lucrative market for crude and a tie-up with Reliance gives them a ready market.

For Reliance, this assures them a steady flow of crude for their refineries from a geographically favorable location. Considering Aramco’s current market cap of $1.9 trillion, Reliance may get 1-1.2% stake in Saudi Aramco via a stock swap. It will be a unique deal between the world’s largest oil exporter and the fastest-growing refinery in Asia.