Why Reliance’s mega deal to sell 20% of its oil business to Saudi Aramco has been stuck

It’s not typical of Mukesh Ambani, Asia’s richest tycoon, to announce a deal before signing a document.

But that’s exactly what he did last year when he told a packed hall of shareholders that Saudi Aramco, the world’s biggest oil producer, was set to buy a 20% stake in Reliance Industries Ltd.’s refining and petrochemicals business, valuing it at $75 billion. So it may have come as a shock to some of those investors when Ambani said on Wednesday that a deal hadn’t been worked out yet with the delay partly down to the coronavirus.

With oil prices around a third lower than a year ago, a typical Asian complex refinery is losing money on every barrel it processes, compared with earnings of almost $7 a barrel last year. The International Energy Agency estimates global oil consumption will slump by 7.9 million barrels a day, or about 8%, in 2020, a big change from the 1.2 million barrels a day of growth it was predicting at the start of the year.

“While the partnership is undoubtedly a prolific one, one could easily imagine the road to fruition is not an easy one,” said Sri Paravaikkarasu, head of Asia oil at industry consultant FGE. “With Covid-19 sending the oil market into a tailspin, Aramco’s earlier strategies will be re-evaluated.”

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