RIL Aramco deal called off
- Reliance Industries and Saudi Aramco have called off a deal for Aramco to buy a stake in the oil-to-chemicals business of the Reliance Industries ltd.
- RIL and Aramco signed a non-binding Letter of Intent in August 2019 for a potential 20 percent stake acquisition by Aramco in the O2C business of Reliance for $15 billion.
- The O2C business of Reliance includes its oil refineries, petrochemical plants and fuel retailing business.
Why the deal failed
There are multiple reasons which have led to the cancellation of the deal
- Due to the Corona pandemic, there was a crash in oil prices which greatly reduced the revenue of oil companies. Aramco is also facing a cash crunch and it doesn't have the money to invest $15 billion in the RIL O2C business.
- World over there is a shift toward reducing the consumption of fossil fuels like oil and gas and moving to green energy like hydrogen, solar, wind energy, etc.
- Also, there has been a change in RIL business plan. RIL has announced that it will become a net-zero carbon emitter by 2030. Central to this plan is the RIL Jamnagar oil refinery complex in Gujarat.
- 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, supporting its net-zero carbon emissions commitment.
- This change in business plan of RIL will adversely affect Aramco business which is mainly in promoting the use and consumption of oil and gas in the world.
Saudi Aramco stands for Saudi Arabian Oil Company and is owned by the Saudi Arabian Government. It is one of the largest companies in the world and also the single greatest contributor to global carbon emissions of any company in the world since 1965.
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