Saudi shows interest in partnering with RIL for investments in oil, telecom

No formal proposal has been made by either side, according to people in the know

Oil-rich Saudi Arabia has been discussing opportunities to partner Mukesh Ambani-promoted Reliance Industries (RIL) for investments and cooperation across segments - from oil to telecom.

“I was delighted today (Tuesday) to meet with (Mr Mukesh) Ambani, chairman of Reliance #RelianceIndustries, where we discussed opportunities for joint investments and cooperation in petrochemicals, refining, and communications projects in Saudi and India,” said Khalid A Al-Falih, Minister of Energy, Industry and Mineral resources for Saudi Arabia in a tweet put out in Arabic on Monday, along with a picture with RIL Chairman Mukesh Ambani.

RIL spokesperson declined to comment on the development.

According to people in the know, the minister was part of the 1,200 attendees at the pre-wedding celebrations of Mukesh Ambani’s daughter Isha in Udaipur earlier this month. “There is no formal proposal made from either side that I am aware of,” said one of the persons.

There is a growing interest from oil companies to invest in refining and petrochemicals related segments in countries like India. In April, for instance, Saudi Aramco, a state-owned company, signed a deal with India to pick a stake in the planned Rs 3-trillion West Coast refinery project in Maharashtra. Industry experts see this as a strategy to de-risk and invest across the value-chain for oil producers. However, there is not much progress at the Maharashtra refinery, owing to land acquisition related issues.

“This is similar to Rosneft’s interest in India. Saudi will see a partnership with RIL as an opportunity to gain access to one of the largest markets in the world, both as a crude oil supplier and to have a stake in the complete petrochemicals value chain,” said an analyst with a domestic brokerage firm, adding, “All possibilities should be open, including synergy through long-term supply contract with RIL or an investment in RIL.”

In August 2017, a consortium of Russia’s Rosneft and Trafigura-UCP Investment Group completed the acquisition of Essar Oil’s refinery and related assets, including the port infrastructure in India.

RIl’s refining segment reported annual revenue of Rs 3.06 trillion for the last financial year and Rs 1.25 trillion for its petrochemicals segment. The company’s Jamnagar refinery is the world’s largest single site refinery, which processed more than 70 million tonnes of crude oil in 2017-18.

RIL has also been on an expansion spree for the last five to six years, with nearly Rs 800 billion spent as capital expenditure in the last financial year alone on various telecom, retail, petrochemicals, and refining business related projects.

According to International Energy Agency’s Oil 2018 report, by 2023, oil demand will rise by 6.9 million barrels a day to reach 104.7 million barrels a day between 2018 and 2023. China and India together will contribute nearly 50 per cent of global oil demand by 2023.