Saudi Arabia to regain India's top oil supplier spot after Reliance deal

Saudi Arabian Oil Co (Aramco) buying a 20 per cent stake in Reliance Industries' oil-to-chemical business will help it regain position of being biggest supplier of oil to world's fastest-growing oil market.

Saudi Arabia, which tritionally has been India's top oil source, lost slot to Iraq during last two financial years.

This will change with Aramco buying 20 per cent stake in RIL's oil-to-chemical (O2C) business, which has an enterprise valuation of USD 75 billion as it will be accompanied with a deal to supply 500,000 barrels per day or 25 million tonne a year of crude oil.

"Crude supplies of 500,000 b/d represents about 40 per cent of Reliance's crude intake, significantly higher than stake taken, although Saudi Aramco historically supplied 20 per cent of Reliance's crude oil requirements," said Alan Gelder, vice president refining and chemicals at Wood Mackenzie.

Saudi Arabia in 2018-19 fiscal exported 40.33 million tonne of crude oil to India, over 15 per cent short of 46.61 million tonne sold by Iraq, according to data sourced from Directorate General of Commercial Intelligence and Statistics.

ditional oil supplies following Reliance deal will catapult Saudi Arabia to top spot again.

O2C business includes Reliance's refining and petrochemical divisions, and its 51 per cent stake in its fuel marketing business. remainder 49 per cent stake in fuel marketing business, which comprises of 1,400 petrol pumps and aviation fuel facilities at 31 airports, has been sold to BP for Rs 7,000 crore.

terms of deal are yet to be finalised, but Reliance, going by enterprise value anunced by its chairman Mukesh Ambani on Monday, will get roughly USD 15 billion, including some debt justments, for 20 per cent stake when sale closes later this year.

Gelder said deal is furr evidence that Saudi Aramco is executing on its long-term strategy to increase its refining and petrochemical capacity.

RE | Reliance AGM 2019| Reliance Industries Limited To Be Zero-net Debt Company In 18 Months: Mukesh Ambani

Saudi Aramco continues to show a keen interest in accessing Indian market, which has strongest long-term growth prospects, he said.

Following same strategy, it along with UAE's C h signed up to take 50 per cent stake in a planned 60 million tonne a year refinery on west coast. Aramco and C are to supply half of crude oil required for proposed refinery that will come up t before 2025.

Saudi Arabia is keen to get a foothold in world's fastest-growing fuel market to get a captive customer for crude oil it produces. Crude oil is basic raw material for manufacturing of petrochemicals.

Like or major producers, it is looking to lock in customers in world's third-largest oil consumer through investment. Kuwait is also looking to invest in projects in return for getting an assured offtake of ir crude oil.

Saudi Aramco is also keen on retailing fuel in India. A refinery in India can also be a base for it to export fuel to deficit countries in Europe and Americas.

India has a refining capacity of 247.6 million tonne, which exceeded demand of 206.2 million tonne.

Reliance's refining and petrochemicals assets include 1.2 million b/d of highly-sophisticated refining assets at Jamnagar in Gujarat. Both its refineries in Jamnagar are heavily integrated with petrochemicals.

company also has a world-leing position in polyester and intermediates, as well as steam crackers and polyolefins capacity at ar four locations in India.

"This strategy is being achieved through a combination of project and acquisitions, with this acquisition following on from last year's acquisition of SABIC and SASREF, and memorandum of understanding Aramco signed this year to acquire a 9 per cent stake in Zhejiang Petrochemical's 800,000 b/d integrated refinery and petrochemical complex in Zhoushan, China," he said.

RE | RIL AGM: 'India A $10 Trillion Ecomy By 2030,' Says Mukesh Ambani, Saudi Aramco Takes 20% Stake In Reliance's Refinery & Chemical Biz At $75 Bn Valuation