The world's biggest oil producer, Saudi Aramco, plans to acquire up
to 30% stake with a key management role in a giant petrochemicals project in
Gujarat, and is negotiating with ONGC Petro additions Ltd (OPaL) for the stake
that can pave the way for the behemoth's entry into the Indian oil and gas
The proposed deal, currently at an advanced stage, will be mutually fruitful as Middle-East oil suppliers are looking for closer links in large Asian markets, with the American continents likely to depend less on crude oil imports as domestic shale production and deep-sea oil and gas output pick up.
Aramco also aspires to be a world leader in chemicals and is partnering Dow Chemicals in a $20-billion venture to build the world's biggest petrochemicals complex in the east of the kingdom. It partners Exxon, Total and other firms in refining and chemicals ventures too.
For India, investment in the Rs 19,500-crore project by the Saudi behemoth will come as a shot in the arm for the business climate, which has suffered as the rupee has tumbled, markets have crashed and foreign investors are jittery.
Saudi Aramco, which has 54,000 employees across 77 countries, is held in awe by the global oil industry as it pumps a staggering 9.5 million barrels per day (bpd), or eight times the capacity of Reliance's Jamnagar complex that processes 1.2 million bpd.
"Saudi Aramco is likely to pick up a significant minority stake between 20% and 30 % in OPaL and will become a strategic investor in the company," a person close to the deal told ET.
This would be the first equity investment by the Saudi major, which virtually dominates the global oil market.
The Gujarat project, likely to be completed by 2014, is being funded with a debt-equity ratio of 60:40.
Deal to boost business climate
It needs a debt of about Rs 12,000 crore and equity capital of approximately Rs 8,000 crore, another person familiar with the deal said.
"However, Saudi Aramco has in principal agreed to pay significant premium to become the partner in the JV that was started in 2006," he said. The proceeds will be used to fund the completion of the project.
"The proposed transaction will be completed through fresh issue of shares by OPaL and resources mobilised through this route will be used to complete the project, which is expected to be commissioned in the second half of 2014," said another person.
ONGC and OpaL did not respond to ET's queries while Aramco said it would not comment on "speculation". However, executives in the domestic and international oil industry said talks were on but the deal was yet to be concluded.
Saudi Aramco's proposed entry into India and joining hands with state-run ONGC in an equity alliance are significant developments for India's hydrocarbon sector, which has also attracted global majors BP and BG. According to an industry veteran in India, ONGC is currently involved in multi-level discussions in various hydrocarbon sectors with Saudi Arabia. "Aramco is also looking at entering Indian markets through co-operation in oil and gas sectors," he said.
Aramco has already invested in other major Asian markets such as China, where it has a joint venture for refining and petrochemicals with Sinopec and ExxonMobil. It also has similar business interests in other Asian countries such as Korea, Vietnam and Indonesia.
ONGC is the lead promoter of OPaL while GAIL and Gujarat State Petroleum Corp (GSPC) are the other partners of the joint venture. Currently, ONGC owns 26% while GAIL has 19% and GSPC 5%. Since Indian promoters are looking for a strategic partner, they have not yet frozen the paid-up capital of the JV, said one of the sources.
Prior to the ongoing negotiations with Aramco, ONGC was negotiating with Kuwait Petroleum. However, the discussions were called off due to differences over price, people familiar with the development said. "At a country level, ONGC was interested in forming equity alliance with one of these Gulf countries - Saudi Arabia, Kuwait and Qatar - as they have a long-term association with India," said the official.
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