Reliance-Aramco deal will integrate Indian consumers with global market, improve energy security

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Updated: August 12, 2019 9:59:52 PM

RIL-Aramco Deal: The deal will help Reliance Industries to cut its debt and invest more in Reliance Jio and Reliance Retail.

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Reliance-Aramco Deal: Reliance Industries chairman Mukesh Ambani’s decision to sell 20 percent stake of RIL’s oil-to-chemical business to Saudi national oil company Aramco will integrate Indian consumers with the world’s largest crude oil producer, said two top former officials, adding that it will also ensure assured supply of crude oil to Indian refineries in the times of crisis and supply disruptions.

This is the second mega-deal in the country’s oil and petroleum sector in a span of less than three years. In 2017, Russian oil and gas major Rosneft led consortium acquired Essar Oil in a $13 billion deal.

These two mega deals by the top global energy firms clearly reflect their interest in India’s energy market.

“World over the consumption of petroleum products is not increasing. In Europe it is going down, in the US it is not increasing. In China, the growth rate has come down and after some time the increase will not take place. Only in Asia, Africa, and Latin America, the consumption is increasing,” said former petroleum secretary SC Tripathi.

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“India is now turning out to be a very large market for petroleum products. Therefore all these companies whether British American company like BP or middle eastern companies like Aramco, they are taking great interest in India,” he told Financial Express Online.

As per the announcement, Saudi Aramco will invest $15 billion in RIL’s oil-to-chemicals business, which is valued at $75 billion.

“We are not only buyers of crude. They will also invest in our downstream, it may be in the midstream also. We can get to invest in their upstream assets so that will strengthen the bond,” said former petroleum secretary Saurabh Chandra.

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Experts also discount any threat to India’s energy security due to foreign firms picking stakes in Indian oil and gas companies.

“If they (Indian companies) are diluting without losing much of the control then there is no harm as they globalise,” said SC Tripathi.

“Here they are getting assured market for their crude oil. They will be supplying a certain quantum of crude to Jam Nagar refinery. All these strategic alliances are welcome,” former petroleum secretary Saurabh Chandra told Financial Express Online.

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