Billionaire Mukesh Ambani's Reliance Industries Ltd has completed spin-off of the firm's oil-to-chemical business into a new unit that will help it pursue growth opportunities with strategic partnerships, the company has said. The oil-to-chemical (O2C) business unit holds Reliance's oil refinery and petrochemical assets and retail fuel business but not upstream oil and gas producing fields such as KG-D6 and textiles business.
Reliance for the first time reported integrated earnings of the O2C business in its third quarter financial results. Previously, refining and petrochemical businesses were reported separately while fuel retailing revenue was part of the firm's overall retail business.
In the October-December 2020 earnings statement, refining and petrochemical as well as fuel retailing businesses earnings were reported as one. As a result, it did not give refining margins - the most sought after number to assess the firm's oil refining business.
Reorganising refining and petrochemicals as oil-to-chemicals (O2C) reflects new strategy as well as management matrix," the company said in a post earning investor presentation. This, it said, will "facilitate holistic and agile decision making" as well as "pursue attractive opportunities for growth with strategic partnerships".
Reliance started work on hiving off the O2C business into a separate unit last year for a possible stake sale to companies such as Saudi Aramco. It values the O2C business at USD 75 billion and has been in talks with Saudi Arabian Oil Co (Aramco) for sale of a 20 per cent interest.
The company, however, did not mention discussions with Aramco, which are said to have hit a valuation roadblock. The reorganisation would "drive the move towards further downstream and closer to customers" and "provide sustainable and affordable energy and materials solutions to meet India's growing needs," the firm said in the presentation.
Reliance O2C Limited houses oil refining and petrochemical plants and manufacturing assets, bulk and wholesale fuel marketing, and Reliance's 51 per cent interest in retail fuel joint venture with BP of the UK.
The O2C unit also houses the firm's Singapore and the UK-based oil trading subsidiaries and marketing subsidiary, Reliance Industries Uruguay Petroquimica SA. It also houses Reliance Ethane Pipeline Limited that operates a pipeline between Dahej in Gujarat and Nagothane in Maharashtra as well as 74.9 per cent stake that Reliance holds in the joint venture with Sibur.
It’s very large ethane carriers, gas pipelines such as one that transports coal-bed methane from its CBM blocks, overseas oil and gas asset holding company Reliance Industries (Middle East) DMCC, and domestic exploration and production assets would not form part of the O2C unit.
Also, Reliance's textiles business as operated out of the Naroda site, Baroda township and land, including cricket stadium, Jamnagar power assets, and Sikka Ports and Terminals Limited would also not be part of the O2C unit.
Ambani had in July 2019 stated that the process of spinning of O2C into a separate subsidiary would be completed by early 2021. Reliance owns and operates twin oil refineries at Jamnagar in Gujarat, with a combined capacity of 68.2 million tonnes per annum.
It is also the country's largest petrochemical manufacturer with units at Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki, and Hoshiarpur. The company holds a 66.6 per cent stake in the KG-D6 block where it is investing about USD 5 billion in developing a second set of gas discoveries along with BP.
It also has a similar stake in the NEC-25 block in the Bay of Bengal and operates two CBM blocks in Madhya Pradesh. These upstream assets are not part of the O2C unit. "Reliance O2C (is) one of the most integrated manufacturers of value-added fuels, chemicals and materials," the presentation said. "O2C to maximize downstream, reduce transportation fuels and create clean and green energy platforms."