* H1 net profit of $46.9 billion
* Reliance says letter of intent signed on stake sale
* Hurt by oil price fall, but lower taxes helped
* Special dividend for government
* Government plans to list Aramco in 2020-21
By Rania El Gamal, Saeed Azhar and Promit Mukherjee
DUBAI/MUMBAI, Aug 12 (Reuters) - Saudi Aramco is planning amultibillion dollar investment in India's Reliance Industriesas the energy giant diversifies its oil business,where weaker prices cut its first-half profit by 12%.
In preparation for what could be the world's largest initialpublic offering (IPO), state-run Aramco began publishing itsresults this year and also started issuing international bonds.The world's top oil producer plans to launch an IPO by2020-2021, having postponed its flotation from last year.
Coinciding with the release of first half results, Aramcosigned a letter of intent to take a 20% stake in Reliance'soil-to-chemicals business in one of the largest ever foreigninvestments in India, Reliance said on Monday.
Aramco's Senior Vice President of Finance, Khalidal-Dabbagh, confirmed the letter of intent had been signed butadded that talks with Reliance were at "very, very earlystages".
He also said that Aramco is ready for its IPO, but thetiming will be decided by its sole shareholder, the Saudigovernment.
While terms of the deal are yet to be finalised, Reliancewill get roughly $15 billion, including some debt adjustmentsfor the 20% stake, P.M.S. Prasad, Executive Director of RelianceIndustries said, adding the two companies aim to close the dealby March 2020.
Aramco is expanding its downstream, or refining, chemicalsand marketing, footprint globally by signing new deals andboosting the capacity of its plants to secure new markets forits crude and reduce its risk to any downturn in oil demand.
For years, Aramco has been a regular crude supplier toIndian refiners via long-term crude contracts.
And while it owned stakes in refineries or storage assets inother key Asia markets such as China, Japan and South Korea aswell as in the United States where it owns Motiva, the largestnational refinery, it has not secured that same access in India,a fast-growing market for fuel and petrochemicals.
The deal will see Reliance buy up to 500,000 barrels a dayof crude oil from Aramco, which would more than double thevolumes that Reliance buys now, Reliance's Prasad said.
"This signifies perfect synergy between the world's largestoil producer and the world's largest integrated refinery andpetrochemicals complex," said Reliance Chairman Mukesh Ambani,while announcing the deal in Mumbai on Monday.
Ambani, who is Asia's richest man, said the deal would bethe biggest foreign investment in the history of Reliance andalso one of the largest foreign investments ever in India.
PROFIT DECLINE
Aramco reported a net profit of $46.9 billion in the firsthalf of 2019, down from $53 billion for the same period lastyear. Despite the profit decline, Aramco remained the world'smost profitable company in terms of headline numbers.
By comparison, Apple Inc, the world's mostprofitable listed company, made $31.5 billion, U.S. rival ExxonMobil Corp. around $5.5 billion and Royal Dutch Shellsome $8.8 billion.
"Despite lower oil prices during the first half of 2019, wecontinued to deliver solid earnings and strong free cash flowunderpinned by our consistent operational performance, costmanagement an fiscal discipline," CEO Amin Nasser said in astatement.
Aramco has been boosting investment in refining andpetrochemicals, with the aim of almost tripling its chemicalsproduction to 34 million tonnes per year by 2030 and raising itsglobal refining capacity to 8-10 million barrels per day (bpd)from more than 5 million bpd.
The company has also been involved in most of the kingdom'shigh-profile deals in the last two years announcing at least $50billion worth of investments in Saudi Arabia, Asia and theUnited States.
The Reliance deal with Aramco will cover all of Reliance'srefining and petrochemical assets, along with its majoritystake in its petroleum retail joint venture.
Last week, British oil major BP said it was forging afuel retailing venture with Reliance, with the Indian companyowning a 51% stake.
Aramco's deals show how Riyadh wants to ensure it would bethe last oil producer left standing when future demand for crudeslows, officials say, and with a cost of production around $4 abarrel, Aramco hardly has any competitors.
The company generated total half-year revenue, includingother income related to sales, of $163.88 billion, down from$167.68 billion a year earlier. Free cash flow rose 6.7% to $38billion.
Aramco said the drop in earnings was mainly due to a 4% fallin the average realised price of crude oil to $66 from $69 perbarrel and an increase in purchases, producing and manufacturingcosts, and depreciation and amortisation costs.
The drop was partially offset by a decrease of $2.62 billionin income taxes, the company said.
Aramco said it will maintain its position as of the world'sbiggest crude producer and would continue to expand its gasoutput and sustain its strong financial position.
"Our financials are strong and we will continue to investfor future growth," CEO Nasser said.
PLANNED IPO
Aramco's planned IPO is the centrepiece of Saudi Arabia'seconomic transformation drive to attract foreign investment anddiversify away from oil.
Work on the IPO was halted in 2018 when Aramco shifted itsattention to the acquisition of a 70% stake in petrochemicalsmaker Saudi Basic Industries Corp.
Aramco also paid a dividend of $46.4 billion to thegovernment including a special dividend of $20 billion, up from$32 billion a year earlier.
This reflects Saudi Arabia's heavy dependence on the oilcompany to finance the kingdom's budget needs as well as thelavish lifestyles of its royal family.
(Additional reporting by Alexandra Ulmer in Mumbai, Hadeel AlSayegh and Davide Barbuscia in Dubai; editing by Jason Neely,David Evans and Keith Weir)
