Reliance’s oil-to-chems ops spin-off to ease entry of foreign investors

Author: Priya Jestin

2021/01/27

MUMBAI (ICIS)--India’s Reliance Industries Ltd (RIL) has spun-off its oil-to-chemicals (O2C) operations which should help facilitate entry of foreign investors like Saudi Aramco into the business.

Saudi Aramco, the world’s biggest crude exporter, is in the process of acquiring a 20% stake in RIL's O2C operations, for $15bn in line with the strategy to grow its downstream operations.

Completion of the deal was pushed back to early 2021 from March 2020.

“In addition to the deal with Saudi Aramco which may happen soon, now Reliance can enter into investment deals with other global oil and gas majors as well,” a source from India’s Ministry of Commerce and Industry said.

The O2C business holds all of RIL’s oil refining and petrochemical plants and manufacturing assets in Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki and Hosiarpur in India.

It further includes RIL’s bulk and wholesale fuel marketing, and its 51% interest in retail fuel joint venture with British Petroleum, as well as oil trading subsidiaries in Singapore and the UK, and Reliance Industries Uruguay Petroquimica.

Also included is Reliance Ethane Pipeline, which operates a pipeline between Dahej in Gujarat state and Nagothane in Maharashtra state, and the 75:25 joint venture Reliance Sibur Elastomers, which operates a 120,000 tonne/year butyl rubber unit at Jamnagar, Gujarat.

All assets relating to RIL’s ongoing refinery and petrochemical projects that are being commissioned or near completion are also included in the O2C business, except textiles and upstream oil and gas producing fields.

In the three months to December 2020, the O2C segment posted a 10% quarter-on-quarter growth in revenue to Indian rupee (Rs) 838.4bn ($11.5bn), with earnings before interest, tax, depreciation and amortization (EBITDA) up 10.3% at Rs97.6bn.

“Refining margins remain weak, but petchem is seeing a recovery,” Japanese brokerage Nomura said in a note on RIL's financial results.

Polymer margins were at record high and intermediate volume/margins were also better quarter on quarter amid a strong demand recovery, it said.

*The period October-December 2020 represents the third quarter in RIL’s fiscal year 2020-21.
*INR is Indian rupee

For the nine months to December 2020, O2C revenues stood at Rs2.19tr, with EBITDA at Rs267.23bn.

December-quarter throughput, including refining throughput, stood at 18.2m tonnes, with the nine-month total at 52.6m tonnes.

“The reorganised O2C structure will facilitate holistic and agile decision making and enable us to pursue attractive new opportunities for growth, with strategic partnerships with the best and the biggest in this business globally,” RIL chairman Mukesh Ambani, chairman and managing director of RIL said in an official statement last week.

RIL expects the O2C platform to increasingly move further downstream and become closer to customers.

The O2C business attracts a distinct set of investors and strategic partners owing to the nature of risks and returns involved in the business, according to Reliance.

The plan to spin-off the business was announced in July 2019.

Apart from energy and petrochemicals, the Indian conglomerate is engaged in telecommunications, retail, textiles, logistics, infrastructure and natural resources businesses.

Focus article by Priya Jestin

($1 = Rs 72.9)

Additional reporting by Nurluqman Suratman

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