MOSCOW (MRC) -- Reliance Industries is continuing talks with Saudi Aramco to form an oil-to-chemicals (O2C) partnership, despite apparent lack of progress as Aramco concentrated on completing a deal to acquire majority stake in Sabic, said Chemweek.
In April, analysts said that the collapse in the price of crude oil has raised the risk that the USD15-billion deal for Aramco to acquire a 20% stake in Reliance Industries’ O2C division may not go through.
However, Mukesh Ambani, chairman and managing director of Reliance Industries, in a letter to shareholders published on Tuesday said discussions with Aramco are on. “In the energy business, Reliance is working to complete the contours of a strategic partnership with Saudi Aramco. The partnership gives our refineries access to a wide portfolio of value-accretive crude grades and enhanced feedstock security for a higher oil-to-chemicals conversion." Ambani did not give a timeline for the potential deal.
He said that the O2C business in the year ended 31 March 2020 “delivered sustained earnings due to its integrated portfolio, cost competitiveness, feedstock flexibility, and product placement capability." However, the industry witnessed a volatile energy price environment, which reflected on feedstock and product prices. "Fiscal year 2019–20 revenue from the petrochemicals segment decreased by 15.6% to 1.453 trillion Indian rupees USD19.2 billion due to lower price realizations with weaker demand in well-supplied markets. Petrochemicals segment’s EBITDA was at Rs.309.3 billion, down due to lower margins in key products—para-xylene, monoethylene glycol, polyethylene terephthalate, polypropylene, and polyethylene," he said.
Aramco last August agreed to a nonbinding initial deal to buy the 20% stake. The O2C business includes Reliance’s huge refining and petrochemical complex at Jamnagar, Gujarat, India, and the company’s other petrochemical assets and fuels marketing businesses. However, the value of the refining and chemical segment has significantly declined since the deal was first structured and the valuation may change. A report by HSBC Securities in May said the O2C business’s enterprise value was USD65 billion, down from the original value of USD75 billion, which would indicate that Reliance would receive USD13 billion from Aramco.
As MRC wrote before, RIL has been running its two refineries almost uninterrupted at its integrated Jamnagar petrochemical complex despite the lockdown.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
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