MOSCOW (MRC) -- Saudi Aramco’s plan to buy USD15-billion stake in Reliance Industries hydrocarbon business may not go through due to the rising risk of collapsing oil prices, US-based brokerage Bernstein has warned, reported Kemicalinfo.
The unique combination of excess crude oil global supply, 30% drop in demand due to coronavirus crisis and continuous price fall weighed heavily on Aramco’s investment plans.
"With the collapse in oil prices, the risk is rising that the deal will not go has increased although we now value downstream at USD55 billion gross, which is a 20% discount to Aramco valuation," Bernstein said in a report on Wednesday.
Last August, Saudi Aramco entered into a non-binding initial agreement to buy 20% stake in Reliance Industries’ oil to chemicals divisions with an enterprise value of USD75 billion. The oil to chemicals division included RIL’s Jamnagar refining complex, petrochemicals and fuels marketing businesses.
Apart from Reliances oil to chemicals business, Aramco also agreed last year to buy the controlling stake in SABIC from the kingdom’s wealth fund for USD69.1bn, sealing one of the biggest-ever deals in the global chemical industry.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.