India’s private sector giant Reliance Industries and Saudi Aramco have put on the backburner a huge $15 billion oil-to-chemicals (O2C) deal, after missing several self-imposed deadlines.

In 2019, the two players had signed a non-binding letter of intent (LoI) with Reliance potentially selling a 20% stake in its oil-to-chemicals business to the Saudi Arabian state-owned giant.

The Indian player said in a statement the two players “have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in O2C business in light of the changed context”.

“Consequently, the current application with NCLT (national company law tribunal) for segregating the O2C business from Reliance is being withdrawn,” it noted.

Reliance said it shall “continue to be Saudi Aramco’s preferred partner for investments in the private sector in India and will collaborate with Saudi Aramco & SABIC for investments in Saudi Arabia.”

While the duo did not elaborate further on the reasons behind the deal’s failure at this stage, Upstream understands that Reliance’s enhanced focus on its new energy business could have led to the decision.

The Indian giant recently unveiled its plans for the development of the huge Dhirubhai Ambani Green Energy Giga Complex at Jamnagar, Gujarat, which could emerge as one of the largest integrated renewable energy manufacturing facilities in the world, according to Reliance.

Coronavirus-related delays

The deal involving the two energy giants has been delayed on many occasions in the past two years due to the Covid-19 outbreak and weakening crude demand.

The deal involves the Indian entity offering at least a 20% stake to the Saudi company in a special purpose vehicle involving its oil-to-chemicals business , valued at almost $15 billion.

Oil-to-chemicals business

Reliance’s oil-to-chemicals business involves refining, petrochemicals, fuel retail and bulk wholesale marketing businesses together with its assets and liabilities.

The deal valued the Indian public sector giant’s oil-to-chemical business at $75 billion.

The mega-deal also included the supply of 500,000 barrels per day of crude by Aramco to the Indian player’s Jamnagar refinery complex in Gujarat on a long-term basis.

While the Reliance-Aramco deal did not include the Indian player’s upstream assets, it was being seen as the first step to increased cooperation between the two energy giants.

Upstream plans

On the upstream front, Reliance and its UK supermajor partner BP are spending about $5 billion on the further development of their flagship KG-D6 asset off India's east coast.

The three ongoing further development projects — R-series, MJ and Satellite Cluster — are crucial to BP and Reliance’s strategy to rejuvenate production from the block.

Peak production from these three fields is expected to reach 1 billion cubic feet equivalent per day, which is about 15% of India's envisaged demand.