• Reliance Industries Ltd and Saudi Arabia’s national oil company, Saudi Aramco, have decided to “re-evaluate” a proposed investment by the latter in RIL’s oil to chemicals (O2C) business.
What was the proposed investment?
• In August 2019, RIL and Aramco signed a non-binding letter of intent for the latter to acquire a 20 percent stake in Reliance’s O2C business in a deal worth $15 billion.
• The deal was expected to benefit RIL’s O2C business in terms of higher feedstock security for its tilt towards higher crude to petrochemical conversion.
What are the factors that have led to the deal being called off?
• The health crisis had played a significant role in delaying the planned investment by Aramco as the pandemic caused crude oil prices to crash in line with demand for petroleum products. this likely impacted Aramco’s ability to acquire the 20 percent stake in the RIL’s O2C business.
• Further, RIL’s announcement to become a net zero carbon emitter by 2030 and plans to optimise its Jamnagar refinery to produce on jet fuels and petrochemicals may have impacted Aramco’s interest in investing in the O2C.
• Jamnagar is set to become the site for RIL’s “Green Energy Giga Complex” which is set to include an integrated solar photovoltaic module factory, an advanced energy storage factory, an electrolyser factory and a fuel cell factory.
Mains Paper 2: International
Prelims level: Reliance and Aramco Deal
Mains level: Factors that have led to the deal being called off