Saudi Aramco and Reliance Industries (RIL) have signed a non-binding letter of intent (LOI) for a proposed investment by the former for a 20% stake in the Indian conglomerate’s Oil to Chemicals (O2C) division in a deal worth $15bn.

The deal is considered to be one of the largest foreign direct investments in India.

The Reliance Industries O2C division combines the company’s refining, petrochemicals, and fuels marketing businesses.

A part of the Reliance Industries Oil to Chemicals division is the Jamnagar refinery in Gujarat state, which will get 500,000 barrels per day of Arabian crude oil from Saudi Aramco on a long term basis upon closing of the proposed transaction.

As such Saudi Aramco and Reliance Industries have a long-standing crude oil supply relationship since more than 25 years. Till date, the Saudi Arabian state-owned company has delivered nearly two billion barrels of crude oil for processing at the Jamnagar refinery.

According to Reliance Industries, the Jamnagar refinery is the world’s largest and most complex refinery, having deep integration of refining and petrochemical activities across various manufacturing facilities.

The Jamnagar refinery boasts of a crude processing capacity of 1.24 million barrels per stream day (BPSD). The Reliance refinery in Jamnagar houses various refining units like the Fluidised Catalytic Cracker (FCC), Coker, Alkylation, Paraxylene, Polypropylene, Petcoke gasification facilities, and Refinery offgas cracker (ROG cracker).

The proposed deal is subject to due diligence and if a definitive agreement is signed, its closing will be based on receipt of regulatory and other customary approvals.

Mukesh Ambani – Chairman and Managing Director of Reliance Industries said: “I am truly delighted to welcome Saudi Aramco, one of the largest business enterprises in the world, as a potential investor in our Oil to Chemicals division.

“We have a long-standing crude oil relationship with Saudi Aramco and we would be happy to see this further strengthened with this investment. Saudi Aramco’s interest is a strong endorsement of the quality of our assets and operations as well as of the potential of India.”

The deal with Saudi Aramco is expected to help Reliance Industries achieve part of its goal to become a zero-debt company in the next 18 months. The transaction follows the deal sealed by the Indian conglomerate with oil and gas major BP earlier this month in the downstream sector.

Under the terms of the BP transaction, the Indian company will sell 49% stake in its domestic fuel retail network to global oil major BP for INR 70 billion ($1 billion), reported livemint. In this connection, the two firms will form a fuel retailing joint venture in which Reliance Industries will hold on to a 51% stake. The created joint venture will also have access to Reliance Industries’ aviation fuel business.

  Gujarat, India, Jamnagar refinery, Mukesh Ambani, Reliance Industries, Saudi Aramco