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

New Delhi: Saudi Arabian Oil Co (Aramco) buying a 20% stake in Reliance Industries' oil-to-chemical business will help it regain the position of being the biggest supplier of oil to the world's fastest-growing oil market. Saudi Arabia, which traditionally has been India's top oil source, lost the slot to Iraq during the last two financial years.

This will change with Aramco buying 20% stake in the 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% of Reliance's crude intake, significantly higher than the stake taken, although Saudi Aramco historically supplied 20% 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% short of 46.61 million tonne sold by Iraq, according to data sourced from the Directorate General of Commercial Intelligence and Statistics. Additional oil supplies following the Reliance deal will catapult Saudi Arabia to top spot again.

The O2C business includes Reliance's refining and petrochemical divisions, and its 51% stake in its fuel marketing business. The remainder 49% stake in the 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.

The terms of the deal are yet to be finalised, but Reliance, going by the enterprise value announced by its chairman Mukesh Ambani on Monday, will get roughly USD 15 billion, including some debt adjustments, for the 20% stake when the sale closes later this year. Gelder said the deal is further evidence that Saudi Aramco is executing on its long-term strategy to increase its refining and petrochemical capacity, adding, Saudi Aramco continues to show a keen interest in accessing the Indian market, which has the strongest long-term growth prospects.

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