India’s Reliance Industries Limited and Saudi Arabian Oil Company called off a $15-billion deal for the state-owned oil major to acquire a 20% stake in the Indian conglomerate’s oil-to-chemical business due to valuation differences, Reuters reported, quoting sources with knowledge of the matter. The non-binding agreement for the acquisition was signed in 2019. However, the energy landscape has changed dramatically since then.
Valuations of oil and gas assets shrank due to the COVID-19 pandemic in 2020. While some of them have recovered, the world has now taken further steps toward a low-carbon future. The sources said Reliance had stuck to the $75-billion valuation for the business originally made in 2019. However, consultants have different views. Bernstein estimates the business to be worth $69 billion, while Kotak Institutional Equities said the business’ valuation stood at $61 billion.
The breakdown of the deal also came as Reliance moved forward with its green initiatives. The company plans to switch to green feedstock and energy in its oil-to-chemical business. It also intends to produce solar panels, batteries, and hydrogen electrolysers. One of the sources also said that Reliance would consider joint ventures and partnerships in India’s specialty chemical market, which is expected to grow and yield better margins.
