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Reuters
DUBAI/MUMBAI
Saudi Aramco is planning a multibillion dollar investment in India’s Reliance Industries as the energy giant diversifies its oil business, where weaker prices cut its first-half profit by 12%.
In preparation for what could be the world’s largest initial public offering (IPO), state-run Aramco began publishing its results this year and also started issuing international bonds. The world’s top oil producer plans to launch an IPO by 2020-2021, having postponed its flotation from last year.
Coinciding with the release of first half results, Aramco signed a letter of intent to take a 20% stake in Reliance’s oil-to-chemicals business in one of the largest ever foreign investments in India, Reliance said on Monday.
Aramco’s Senior Vice President of Finance, Khalid al-Dabbagh, confirmed the letter of intent had been signed but added that talks with Reliance were at “very, very early stages”.
He also said that Aramco is ready for its IPO, but the timing will be decided by its sole shareholder, the Saudi government.
While terms of the deal are yet to be finalised, Reliance will get roughly $15 billion, including some debt adjustments for the 20% stake, P.M.S. Prasad, Executive Director of Reliance Industries said, adding the two companies aim to close the deal by March 2020.
Aramco is expanding its downstream, or refining, chemicals and marketing, footprint globally by signing new deals and boosting the capacity of its plants to secure new markets for its crude and reduce its risk to any downturn in oil demand.
For years, Aramco has been a regular crude supplier to Indian refiners via long-term crude contracts.
And while it owned stakes in refineries or storage assets in other key Asia markets such as China, Japan and South Korea as well as in the United States where it owns Motiva, the largest national refinery, it has not secured that same access in India, a fast-growing market for fuel and petrochemicals.
The deal will see Reliance buy up to 500,000 barrels a day of crude oil from Aramco, which would more than double the volumes that Reliance buys now, Reliance’s Prasad said.
“This signifies perfect synergy between the world’s largest oil producer and the world’s largest integrated refinery and petrochemicals complex,” said Reliance Chairman Mukesh Ambani, while announcing the deal in Mumbai on Monday.
Ambani, who is Asia’s richest man, said the deal would be the biggest foreign investment in the history of Reliance and also one of the largest foreign investments ever in India.
Aramco reported a net profit of $46.9 billion in the first half of 2019, down from $53 billion for the same period last year. Despite the profit decline, Aramco remained the world’s most profitable company in terms of headline numbers.
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13/08/2019
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