Saudi Arabia Eyes Expansion in India’s Refining Sector with New Investments

In a strategic push to ensure a long-term market for its crude oil, Saudi Arabia is partnering with Indian public sector companies to establish two new refineries in India. This move marks a renewed effort by the kingdom following two earlier setbacks in similar ventures.

Refinery Plans and Investment Details

According to news reports, Saudi Aramco is in talks with Bharat Petroleum Corporation Ltd (BPCL) and Oil and Natural Gas Corporation (ONGC) to acquire up to a 26% equity stake in their respective refinery projects. Each refinery is expected to have a capacity of around 9 million tonnes per annum (mtpa). The total investment for such a stake could amount to ₹18,000 crore.

BPCL is currently preparing a feasibility report for its proposed refinery-cum-petrochemical complex in Andhra Pradesh, which is likely to have a capacity between 9-12 mtpa. A 9 mtpa facility could cost around ₹95,000 crore, and with an assumed debt-equity ratio of 65:35, the equity contribution would amount to approximately ₹33,000 crore. Aramco’s share in this project, estimated at 26%, could cost around ₹9,000 crore.

Similarly, ONGC is considering a refinery of comparable capacity, preferably located in Uttar Pradesh, due to the region’s high fuel demand and insufficient local refining capacity. ONGC is exploring a land parcel near Prayagraj, originally acquired by BPCL for a project that did not materialise. While ONGC is open to offering a stake between 20% and 49%, Aramco is reportedly aiming for a 26% or lower share.

Negotiations and Strategic Terms

In exchange for its equity stake, Aramco has reportedly insisted on supplying the majority of crude required by the proposed refineries over their economic life. However, Indian refiners have so far resisted this condition. As per news reports, Indian firms may consider accepting Saudi crude on a large scale only if Aramco offers favourable concessions such as price discounts, freight waivers, or extended credit terms.

Negotiations between Aramco and ONGC remain in early stages, and critical project details, including refinery configuration, location, and cost, are yet to be finalised. Meanwhile, both BPCL and ONGC have not commented on the ongoing discussions.

This marks the third major attempt by Aramco to enter India’s refining market. A 2018 deal with a consortium of Indian state-run refiners for a 60 mtpa refinery in Maharashtra was stalled due to land acquisition issues. Similarly, a $15 billion deal in 2019 with Reliance Industries for a 20% stake in its oil-to-chemical business was cancelled in 2021 over valuation differences.

Read More: Saudi Aramco Eyes Investment Plans in BPCL and ONGC Refineries.

Conclusion

Saudi Aramco’s renewed engagement with Indian public sector firms reflects its persistent strategy to secure long-term crude oil markets. While key aspects of the proposed projects remain under discussion, the collaboration marks a significant development in India-Saudi Arabia energy ties.

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