Indian conglomerate Essar Group has reportedly completed preliminary discussions with Saudi Aramco regarding the sale of its refinery business to the state-owned oil giant.
Essar is held by Indian billionaire brothers, Shashi Ruia and Ravi Ruia.
Aramco and Essar are believed to have commenced talks last month about the former purchasing a stock in Essar Oil, which is valued at $5.5bn (SAR20.6bn).
Essar Group officials are reported to have met Aramco executives at the World Economic Forum in Davos.
According to Bloomberg, Essar Group is considering the sale of its assets after its earnings were hit by a fall in commodity prices, weak demand, and lower capacity usage at its businesses.
The Ruia brothers are reportedly hoping to pay off some of the conglomerate's loans with the sale proceeds.
Essar Group was reportedly eyeing $3bn (SAR11.2bn) from a sale of 49% stake in Essar Oil to Rosneft, a Russian oil company held majorly by the government.
Sources say there is no certainty Aramco will indeed proceed with the negotiations, and its discussions with Essar were reportedly held to provide the Indian giant the option of an alternative buyer in case talks with Rosneft fall through.
Bloomberg said Essar Group said via email that it has signed a non-binding term sheet with Rosneft for exclusive negotiations about the potential purchase of a 49% stake in Essar Oil, but declined to comment further.
Rosneft also released a statement regarding its work with Essar.
“Rosneft has not changed its plans and continues work in accordance with the signed agreement on terms for the company’s possible entry into shareholding structure of Essar Oil,” the Russian company’s press office said in an e-mailed statement.
“Talks on this project continue on the working group level in accordance with the existing agreement on exclusivity.”
Aramco has previously stated it will continue to invest in the oil and gas sector, despite the global slowdown in crude values.
The oil company also confirmed it is considering various options to allow for a full or partial floatation of an initial public offering (IPO) of its stake.
Chairman Khalid Al Falih said the sale of a stake in the whole company would involve issues related to law and sovereignty that would need to be resolved.
"Our investments in capacity of oil and gas have not slowed down," he said.
"We have been able to do a lot of cuts in spending by simply driving down costs."For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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