Saudi Aramco is in discussions to invest in two upcoming refinery projects in India, aiming to secure a stable, long-term market for its crude oil in the world’s fastest-growing emerging economy, according to sources familiar with the matter.
India, the world’s third-largest oil consumer and importer, is actively positioning itself as a global refining hub, particularly as Western countries scale back crude processing capacity in favor of cleaner energy sources.
Meanwhile, Saudi Arabia’s share of India’s oil imports has declined as Indian refiners, after investing billions in plant upgrades, diversify their crude sources to take advantage of cost-effective alternatives, including Russian oil.
Aramco’s Refinery Investment Plans
The Saudi state-controlled oil giant is in separate negotiations to invest in:
- Bharat Petroleum Corp Ltd (BPCL): A planned refinery and petrochemical complex in Andhra Pradesh, with an estimated investment of $11 billion.
- Oil and Natural Gas Corp (ONGC): A proposed refinery project in Gujarat, still in its early planning stages.
Both BPCL and ONGC are state-owned entities, and while talks with Aramco are ongoing, two refinery sources confirmed that these projects will move forward regardless of whether the Saudi company invests.
“It all depends on the proposal Aramco puts forward,” one source stated.
Aramco’s Terms and Indian Refiners’ Concerns
Sources indicate that Aramco has proposed supplying crude equivalent to three times its stake in each project, with the flexibility to sell its share of refined products either in India or through exports.
However, an Indian refinery source raised concerns about Aramco’s terms:
“We want flexibility in crude procurement. If we give Aramco a 30% stake, they want to supply crude equivalent to 90% of the refinery’s capacity, which is not feasible for us.”
Further details, including Aramco’s exact investment size and the final configuration of these refineries, remain undisclosed.
Diplomatic Push for an Agreement
Indian Prime Minister Narendra Modi is expected to visit Saudi Arabia in the second quarter of this year, and both nations are working to finalize an agreement ahead of the visit, according to a source familiar with the discussions.
India’s foreign ministry has not yet commented on the matter.
Aramco’s Longstanding Pursuit of Indian Refining Opportunities
Aramco has been actively seeking refining investments in India for several years:
- In 2018, it joined a consortium of Indian firms to develop a 1.2 million barrels per day (bpd) refinery and petrochemical project in western India. However, the project has been delayed due to land acquisition challenges.
- In 2019, Aramco signed a non-binding agreement to acquire a 20% stake in Reliance Industries’ oil-to-chemicals business, but the deal was later scrapped over valuation disagreements.
- In January 2024, Indian Oil Minister Hardeep Singh Puri announced India’s plans to set up three new refineries of 400,000 bpd each, signaling strong government backing for expanding refining capacity.
With Aramco eager to establish a presence in India’s refining sector, the outcome of these negotiations could significantly shape the country’s future energy landscape.