Like NNPC in Dangote, Saudi’s Aramco Dangles $25Bn for 20% Stake in Reliance

Oluchi Chibuzor with agency report

Saudi Aramco is in advanced talks for an all-stock deal to acquire a stake in Reliance Industries Limited’s oil refining and chemicals business, people with knowledge of the matter told Bloomberg.

The Saudi Arabian firm is discussing the purchase of a roughly 20 per cent stake in the Reliance unit for about $20 billion to $25 billion-worth of Aramco shares, the people said, asking not to be identified because the information is private.

The announcement comes about two weeks after the Federal Executive Council (FEC) approved the acquisition of 20 per cent minority stakes by the Nigerian National Petroleum Corporation (NNPC) in upcoming Dangote Petroleum and Petro-Chemical Refinery.

Dangote Petroleum Refinery is a 650,000 barrels per day (BPD) integrated refinery project under construction in the Lekki Free Zone near Lagos, Nigeria. It is expected to be Africa’s biggest oil refinery and the world’s biggest single-train facility.

The Pipeline Infrastructure at the Dangote Petroleum Refinery is the largest anywhere in the world, with 1,100 kilometers to handle 3 Billion Standard Cubic Foot of gas per day. The Refinery alone has a 400MW Power Plant that is able to meet the total power requirement of Ibadan DisCo.

The Refinery will meet 100 per cent of the Nigerian requirement of all refined products and also have a surplus of each of these products for export.

It is designed to process Nigerian crude with the ability to also process other crudes.

Reliance, which is backed by Indian billionaire Mukesh Ambani, could reach an agreement with Aramco as soon as the coming weeks, the people said.

Shares in Reliance extended gains to as much as 2.6 per cent in Mumbai after the Bloomberg News report.

A deal would forge a closer alliance between the world’s biggest oil exporter and one of the fastest-growing consumers. Ties and trade between the two countries have grown in recent years as India looks to bolster its energy security and Saudi Arabia reduces its support for Pakistan over the disputed territory of Kashmir.

Riyadh and New Delhi elevated their relationship to a “strategic partnership” in 2019.

It would seal more than two years of negotiations and mark Aramco’s first all-stock deal since its initial public offering in 2019.

Ambani confirmed talks about a deal with an implied stake valuation of $15 billion that same year. Discussions were delayed by the onset of the coronavirus pandemic and slump in oil prices.

Energy markets have since recovered, with crude prices jumping around 35 per cent this year to almost $70 a barrel. Aramco said last week due diligence on a deal with Reliance was underway.

A transaction would boost Aramco’s sales of crude to India. For Reliance, it would help to lock in a steady supply of oil for its giant refineries and make the Indian company a shareholder in Aramco.

Based on Aramco’s market valuation of about $1.9 trillion, a transaction would give Reliance a stake of around one per cent.

Details of the potential transaction are still being negotiated, and talks could drag on longer or fall apart, the people said. A representative for Aramco declined to comment.

The Saudi government’s Center for International Communication didn’t immediately respond to an email requesting comment.

A representative for Reliance said the company does not have anything to add beyond Ambani’s comments at the shareholders’ meeting in June, when the conglomerate appointed Aramco Chairman Yasir Al-Rumayyan to the board. Ambani had said Reliance could finalize an investment deal with the oil producer this year.

The transaction would help Aramco reach its goal of more than doubling refining capacity to between eight million and 10 million barrels of crude a day. The Saudi firm had 3.6 million barrels a day of capacity at the end of last year, including stakes in joint ventures.