Mukesh Ambani flagship
will be investing $1.2-1.5 billion in a factory to manufacture ethylene dichloride (EDC), located next to Adnoc’s integrated refining and petrochemicals site in Ruwais – the biggest such complex in the Middle East. Adnoc is expected to make a similar investment.
This is likely to be the largest equity investment for India’s largest conglomerate in the region, even as subdued recovery in volumes and margins for both petroleum refining and chemicals on account of the pandemic has plagued players the world over.
Government officials feel this will further strengthen energy ties with the Emirate, the fifth-largest oil supplier to India. India is the world’s third-biggest oil importer and consumer.
International base in UAE
Adnoc has been the first foreign energy company to partner in India’s strategic petroleum reserves programme and a stakeholder in a proposed refinery-petrochemicals project in Maharashtra’s Ratnagiri. That project, though, is now on the back-burner over land acquisition issues.
A formal announcement is expected in Abu Dhabi this week, possibly as early as Tuesday. Reliance, the country’s top corporate exporter, is also expected to set up an international base in the UAE to avail that country’s liberal fiscal and tax policies.
Emails to Reliance and Adnoc did not receive a response on Monday evening.
Adnoc would supply ethylene to the proposed joint venture and provide access to its existing infrastructure at Ruwais, while RIL would bring its operational expertise as well as access to the growing Indian vinyls market, both companies had said in a joint statement in December 2019.
EDC is a basic building block for the manufacture of polyvinyl chloride (PVC), a polymer product widely used in housing, agriculture and a range of other sectors.
“This is a significant step towards Reliance’s commitment to pursue backward integration. It will pave the way for enhancing PVC capacity in India to cater to the fast-growing domestic market,” Nikhil Meswani, executive director, RIL, had said then. “This cooperation ideally combines advantaged feedstock and energy from the UAE with Reliance’s execution capabilities and the growing Indian market.”
Mega complex
Adnoc is investing $45 billion in both upstream and downstream operations as part of a longer-term strategy till 2030. In the downstream sector, it has a target to treble petrochemicals production to 14.4 million tonnes annually by 2025.
The company has been looking to produce a full range of petrochemicals products in its Ruwais Derivatives and Conversion Park with a view to attracting firms to set up operations, using the refinery’s output as feedstock. The Ruwais refinery complex can process up to 837,000 barrels of crude oil and condensate per day, making it the fourth-largest, single-site oil refinery in the world.
“Reliance has been a buyer of Gulf crude and gas for a long time, which has helped build deep roots with Qatar, Bahrain and Kuwait, other than Saudi Arabia and UAE. But over time, it is also looking at market access in the entire Gulf region for a whole range of its businesses – hydrocarbons, renewables, retail. The Abu Dhabi port also gives it a strategic base or hub to tap the entire region,” said a group watcher who did not wish to be identified. “Beyond sourcing, there is already a deep commercial link between both sides for all the new ventures or infrastructure play.”
Last year, sovereign wealth funds Abu Dhabi Investment Authority (ADIA) and Mubadala together had invested over $3 billion in Ambani’s Jio Platforms and retail venture as part of the mega Rs 3.24-lakh crore ($44 billion) fundraise by the group.
ADIA, along with Saudi Arabia’s Public Investment Fund, also invested over $1 billion (Rs 7,558 crore) in an infrastructure investment trust that holds Jio’s fibre optic assets.
RIL chairman Ambani also reiterated at the recently concluded annual general meeting, that the $15-billion investment by Saudi Aramco in the oil-to-chemicals business is on track and should conclude this year. RIL has already hived off its petrochemical and refining business into a separate subsidiary, as a precursor to the Aramco deal.
Consequently, separate cash flows and financial details of its petrochemicals and refining business are available only till the second quarter of FY21. In FY20, the petrochemicals and refining business had operating profits of Rs 30,927 crore and Rs 23,925 crore, respectively.
(Additional reporting by Ashutosh R Shyam)
