RIYADH, Saudi Arabia—Global oil giant Saudi Aramco plans to invest $15 billion in a Reliance Industries Ltd. unit that includes one of the world's largest polypropylene businesses.
State-owned Saudi Aramco, based in Riyadh, has signed a non-binding letter of intent to acquire a 20 percent stake in the Oil to Chemicals (O2C) unit of Mumbai-based Reliance, officials said in an Aug. 12 news release. The O2C unit is valued at $75 billion.
The businesses of O2C include refining, fuels marketing and petrochemicals. The petrochemicals part of the business includes major PP resin operations, as well as production of polyethylene, PVC, PE pipe, PET bottle resin, polyester staple fiber and yarn, elastomers and composites.
Officials said in the release that Saudi Aramco's investment would be one of the largest foreign investments ever made in India. Saudi Aramco has supplied Reliance with crude oil for more than 25 years.
Officials added that Saudi Aramco is the world's largest and lowest cost-per-barrel producer of crude oil, and is geographically close to India. The firm also offers a wide range of crude supply options.
Reliance's Jamnagar refinery—which officials said is the largest and most complex refinery in the world—includes petrochemical production at multiple manufacturing sites. Under the proposed investment, Saudi Aramco would supply Arabian crude oil to the Jamnagar refinery on a long-term basis.
"We have a long-standing crude oil relationship with Saudi Aramco and we would be happy to see this further strengthened with this investment," Reliance Chairman and Managing Director Mukesh Ambani said in the release. "Saudi Aramco's interest is a strong endorsement of the quality of our assets and operations as well as of the potential of India."
The proposed deal is subject to due diligence. A definitive agreement will be subject to regulatory and other customary approvals, officials said. No timeline for completion of the deal was cited in the release.
Reliance ranks as India's largest private sector company, with annual sales of just over $90 billion. The firm's businesses include hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals and retail and digital services.
Saudi Aramco ranks as one of the world's largest businesses, with sales of almost $356 billion in 2018. In March, the firm paid a little more than $69 billion for a 70 percent stake in global commodity and engineering resins supplier Saudi Basic Industries Corp. Saudi Aramco also has partnered with Dow Inc. on the Sadara plastics and petrochemicals joint venture in Saudi Arabia.