Reliance Industries Ltd and Saudi Arabia’s national oil company, Saudi Aramco, have come to a decision to “re-evaluate” a proposed investment in RIL’s oil to chemicals (O2C) business.

According to The Indian Express, RIL and Aramco signed a non-binding letter of intent for the latter to acquire a 20 per cent stake in Reliance’s O2C business in a deal worth $15 billion in August 2019. It is said that the deal was expected to benefit RIL’s O2C business in terms of higher feedstock security for its tilt towards higher crude to petrochemical conversion.

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The coronavirus pandemic played a major role in delaying the planned investment by Aramco as it caused crude oil prices to crash in line with demand for petroleum products. Experts noted that this likely impacted Aramco’s ability to acquire the 20 per cent stake in the RIL’s O2C business.

Also, the RIL’s announcement to become a net zero carbon emitter by 2030 and its plan to optimise its Jamnagar refinery to produce on jet fuels and petrochemicals may have impacted Aramco’s interest in investing in the O2C.

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In a statement, RIL said, “RIL and Aramco 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.” The company said the Jamnagar complex which is a key part of its O2C business would be the centre of Reliance’s renewable energy and new materials business.

“These plans are counterintuitive to Aramco’s interest and world view. Oil production countries have been making the case that fossil fuel assets need to be given more time and investment so that the energy transition can be gradual,” said an equity analyst who did not wish to be named.

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According to reports, Jamnagar is set to become the site for RIL’s “Green Energy Giga Complex” which is set to include an integrated solar photovoltaic module factory, an advanced energy storage factory, an electrolyser factory and a fuel cell factory.

It is also noted that Aramco may have had concerns that a large part of it’s investment could be used to repay loans to RIL, which the Mukesh Ambani led firm may then use to fund its green energy related projects.