Home / Opinion / Columns /  Aramco’s Reliance deal: Climate action casualty?
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An alliance of national champions in a sector that must more or less be snuffed out in three decades to save the planet, as announced by Reliance and Saudi Aramco in 2019, must surely have had this context of a flame-out playing a key role in its operative logic. Yet, their agreement for Saudi Arabia’s state-owned oil major to buy 20% of a proposed refinery+chem carve-out of Mukesh Ambani’s megacorp for $15 billion might have stumbled on the Glasgow Climate Pact. Last week, as their views reportedly diverged, they paused to “re-evaluate" the deal, while Reliance said this business was part of its green giga plans and would not be carved out after all. By the estimates of some global analysts, CoP-26 may have hit its overall value by at least $5 billion. Shortly earlier, however, in a rejig of its green strategy, Ambani had declared plans to invest $10 billion in renewables by 2030, with solar power and storage in play but also a high-synergy focus on hydrogen energy, and then go carbon neutral within five years. Reliance also expects to pivot from fossil fuels to cleaner chemicals, and its revised math on its hydrocarbon prospects could well have exceeded those external evaluations. Globally, business conditions have been in flux, especially after our alert level on climate doom was raised by updated forecasts and the US shifted stance this year from denial of the crisis to advocacy of an effective response.

As a stake less than 26% offers no veto power, Aramco would only have had the say of a board seat in Reliance, though aligning interests could have had significant scope for mutual gains. Today, climate action looms large. For a carbon-neutral world, we must muzzle the emissions of an oil-and-gas industry whose operations account for some 9% of all heat-trapping gases, with the use of its fuel supplies adding another 33%. New pledges aimed at neutrality now imply a heavier burden than before. Carbon levies could kick in. Reliance’s disclosures for 2020-21 suggest an exhaust level of at least 57 million tonnes of carbon dioxide equivalent, most of it direct. Its Jam- nagar refinery has a capacity of 1.24 million barrels of crude per day and it runs another closeby that can refine 580,000 barrels. This process spouts only a fraction of the dirty gases released by the actual burning of fuels, but it’s still more than what oil extraction emits, typically. For privileged and relatively clean crude supplies, Aramco was an obvious bet.

That may still be so. Thanks to reserves that are easy to access and its old depreciated oil rigs, Aramco’s competitive edge lies in the low cost and exhaust of what it pumps out. It can produce 12 million barrels per day, though it did an average of just above 9 million in 2020 and emitted only 67 million tonnes of CO2 equivalent, as it claims. It too has hydrogen on its agenda, and while it has a net-zero target of 2050, it plans to add another 1 million barrels of spare capacity to press home its advantage over costlier and dirtier suppliers. This would enhance its sway over the global crude market. Aramco is often called the ‘central bank’ of oil, given its special ability to move global prices by altering supply volumes. This strategic role grants it a heft that only looks set to increase under climate pressure; and its allies could benefit from it. Reliance has clearly revised its oil calculus, but since carbon action doesn’t alter the sector’s basics, a revival of talks with Aramco at some point shouldn’t surprise us.

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