A deal that shows the end of an oil-and-gas super-cycle

A deal that shows the end of an oil-and-gas super-cycle

Reliance Industries Ltd’s (RIL) chairman and managing director Mukesh Ambani has a good sense of timing when it comes to decisions about his business. This was on view once again in his announcement that the company had a non-binding letter of intent in place for selling a 20% stake, approximately valued at $15 billion, in RIL’s oil and chemicals business to Saudi Aramco.

The move, if it goes through, along with an earlier deal with BP Plc. whereby the European oil company will pay nearly a billion dollars for a 49% stake in the Indian conglomerate’s fuel retail business, is the clearest sign yet that Ambani now reckons that oil and gas is no longer the business of the future.

Sure, RIL needs the money mostly to repay debt taken for its ambitious plans in telecom, and even there, its situation is by no means alarming. The company’s capital expenditure cycle that began in 2014 is now over, but while repayment should normally take 7-10 years, Ambani is deleveraging it to make it debt-free in the next two years. Read More

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