Reliance Armaco Deal
Reliance Industries Limited• RIL evolved from being a textile and polyester company to an integrated player across energy, materials, retail, entertainment, media, communication and digital services.
• Current market valuation – $14228.01B
• It has the world's largest refinery- Jamnagar manufacturing division.
• Has a capacity of 1.24 million Barrels Per Stream Day (BPSD).
• Fuels from the refinery are exported to several countries.
• Another refinery in SEZ at Jamnagar with a capacity for processing 580,000 BPD of crude.
Saudi Aramco
• Saudi Arabian multinational petroleum and natural gas company based in Dhahran.
• One of the largest companies in the world by revenue.
• Largest daily oil production of all oil-producing companies.
• World’s second-largest crude oil reserves – 270 billion barrels
• Origins can be traced to 1933 when a Concession Agreement was signed between Saudi Arabia and the Standard Oil Company of California (SOCAL).
Facts of the deal
• Saudi Aramco to buy 20% stake in Reliance Industries Ltd.’s refining and chemical business, at an enterprise value of $75 billion.
• Saudi Aramco would pay about $15 billion in cash
• Aramco will assume debt for 20 percent of Reliance’s petroleum and chemicals business
• About half the money would be paid when the deal closed
• Remainder paid out over the next two years
• Aramco will supply about 500,000 barrels of oil a day to RIL’s refinery
• Aramco to get at least two senior management positions in the petroleum-related businesses and a seat on the parent company’s board
• This deal will help Aramco reach its goal of more than doubling refining capacity to between 8 million and 10 million barrels a day
• Deal delayed due to differences overvaluation of the refining and petrochemical business of RIL
• Aramco balance sheet affected by fall in crude oil prices and due to a fall in oil consumption during COVID.
• RILs valuation has also gone down due to falling in crude oil prices
• Another asset also available in the market for Aramco to purchase – Bharat Petroleum Corp. Ltd (BPCL)
Implications of the deal
• Improve consumer experience in India and expose even state-run retailers to best global practices
• investment from Aramco would also be looked into specifically in the area of high temperature deep-sea offshore exploration
• Heartache for Pakistan (seeking the support of foreign powers over the status of J&K)
• Pakistan is heavily in debt to Saudi Arabia, it depends hugely on Saudi’s largess to avoid economic collapse
• Saudi Arabia has considerable leverage over Pakistan and Pakistan, in turn, cannot afford to ignore Saudi economic interests when wargaming an offensive strategy against India.
• Should Saudi invest in Indian oil and gas assets, it will deter Pakistan from bringing these assets into their strategic calculus.
• RIL would ‘strengthen’ the security perimeter around its oil and gas facilities.
• Resources for expanding the business even further
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