Saudi Aramco, the world’s largest oil-producing company, may consider investing in the solar and speciality chemicals businesses of Reliance Industries (RIL), say sources in investment banking. “It will be a strategic investment that will support Aramco’s aggressive push for controlling carbon emission,” says a Mumbai-based banker.
The Saudi Kingdom-controlled oil producer has recently announced its plan to achieve net-zero Scope 1 and 2 greenhouse gas emissions across its wholly-owned and operated assets by 2050. Moreover, Saudi Arabia has set a target of achieving net-zero carbon emissions by 2060, though it expands oil and gas production capacity.
To offset the emissions, Aramco has recently picked up a 30% stake in Sudair Solar—a $900 million solar project—through its wholly-owned subsidiary Sapco. Saudi energy minister Prince Abdulaziz bin Salman earlier said that the kingdom—the world’s largest oil exporter—wants to derive 50% of its electricity from green power sources by 2030. The country targets to become another Germany when it comes to renewables, he says.
Aramco is keen on joining the new energy and materials business of RIL, tell sources. “The new business is integrally linked to the oil to chemicals (O2C) business as a source of energy, and in the context of achieving net carbon zero goals by 2035,” says a company official. “The full value of this integration is also best extracted by repurposing the existing O2C assets, as well as evaluating multiple joint ventures in downstream ventures in speciality chemicals,” he adds. Jamnagar will be the common centre of activity for O2C and new energy.
“RIL and Aramco have specifically talked about how the deep engagement and long-standing relationship provides a platform for broader areas of cooperation,” says the official. RIL has already made significant progress towards building a solar ecosystem and is advancing on its plans to repurpose its assets, he adds.
Industry experts say that the Saudi giant and RIL have great operational and trade synergy. “RIL sources crude from Aramco for decades. With the launch of Reliance New Energy Solar Ltd and the four giga factories in Jamnagar, Aramco will be able to source solar photovoltaic modules and storage batteries from RIL. The trade relations will be strengthened with equity partnerships in business,” says an analyst.
Aramco and RIL have recently decided to reevaluate the $15 billion mega-deal, in light of RIL's foray into solar energy. Consequently, RIL has withdrawn the application with the NCLT for segregating O2C business under the new entity Reliance O2C Ltd. The deal valued the business at $75 billion.
“Saudi Aramco and Reliance are deeply committed to creating a win-win partnership and will make future disclosures as appropriate," RIL said earlier in a statement. RIL will continue to be Aramco’s preferred partner for investments in the private sector in India and will collaborate with Saudi Aramco and SABIC for investments in Saudi Arabia, it added.