Saudi Aramco in Indian partnership to build the world’s largest refinery
Saudi Arabia and India are important countries in the global economy — both are among the world’s largest, and part of the “G20” group.
The pair have a unique relationship, with historical, economic, social and cultural ties, and strong trade links. Hence, the visit of Crown Prince Mohammed bin Salman to New Delhi this week will capitalize on a relationship more than 70 years in the making, to create a new era of economic cooperation.
The Kingdom is the subcontinent’s fourth largest trading partner, providing almost 20 percent of its crude oil imports. India is the third largest consumer of crude in the world after the US and China, using more than 4 million barrels of crude oil per day (bpd). Demand is expected to rise in the medium-term to nearly 6 million bpd, climbing to around 10 million bpd by 2040.
Plans by Indian refiners and Saudi Aramco to build a new refinery with a capacity of about 1.2 million bpd on India's western coast would make it the largest single refinery in the world, and put it within touching distance of the Arabian Gulf.
The rapid growth in oil consumption is a major challenge for India, which has a total refining capacity of about 4.6 million bpd. Currently, that is not enough to meet local demand. The country’s energy policies also restrict imports of petroleum products, placing greater strain on local refining. A partnership with Saudi Arabia therefore, the world’s largest oil exporter, will be invaluable to safeguard future supply.
Indian refiners plan to push billions of dollars into increasing domestic refining capacity, to keep pace with the growing demand. There are also plans to build a new refinery on the western coast, with a mooted capacity of about 1.2 million bpd, with Saudi Aramco. That would make it the largest single refinery in the world, and put it within touching distance of the Arabian Gulf.
Saudi Aramco is the best possible partner for constructing such a refinery, with a greater breadth of knowledge on construction and refinery than any other producer in the region. Aramco’s stake in this mega refinery will also be an important strategic step for the oil giant, adding a key link to its global refining chain in one of the world’s fastest-growing markets, whilst diversifying away from domestically produced petroleum products.
Though initially appearing at odds with the Kingdom’s Vision 2030 plan to move away from oil as the core source of its revenue, the hope is that partnerships in oil refineries abroad, especially with countries as vast and important for trade as India, will have knock-on effects for the wider global economy. The value added from an integrated refining and petrochemical complex should help to diversify the local economy, generating cheaper fuel for consumers and businesses, which in turn will create wealth in other sectors, including trade with the Gulf.
• Faisal Mrza is an energy and oil market adviser. He was formerly with OPEC and Saudi Aramco. Twitter: @faisalmrza