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Saudi prioritizes India as 'No. 1' investment destination

Highlights

• Falih wants Aramco to be 'household name'

• Kingdom to invest $100 billion in India

• India heavily reliant on Saudi crude

Singapore — The world's largest crude oil exporter, Saudi Arabia, is looking to strengthen its oil ties with India, which has emerged as its "No. 1 priority for investment" outside the kingdom, oil minister Khalid al-Falih said Wednesday.

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A similar sentiment was echoed by Saudi Aramco CEO Amin Nasser, who said the company is looking for additional opportunities in India's oil sector where it expects demand growth to remain robust in the coming years. Falih and Nasser are part of the high-profile delegation accompanying the Saudi Crown Prince Mohammed bin Salman's first New Delhi visit this week.

"We want Saudi Aramco to be a household name in India," Falih added. The kingdom also said it will invest $100 billion in India, with the bulk of funds going toward infrastructure and energy sectors, including downstream segments like refining and petrochemicals.

Highlighting that India is an investment priority for Aramco, Nasser said the company has been looking for joint-venture opportunities, not only with Indian state-run companies but also with private companies like Reliance Industries, which operates the world's largest refinery. "We remain positive on our investment in India," Nasser said.

REFINERY PROJECTS

One of the biggest downstream projects planned in India is the Ratnagiri refinery, a mega refinery and petrochemicals complex on the western coast with a capacity of 60 million mt/year.

It is being jointly built by state-run refiners Indian Oil Corp., Hindustan Petroleum Corp. and Bharat Petroleum Corp., with Saudi Aramco and ADNOC signed on for an initial agreement to jointly take a stake in that project.

Some analysts have said the project could face delays as the land acquisition process had not yet been completed.

"We are not limited to that investment, which is the mega refinery," Nasser added. "We are looking at other opportunities. India is an investment priority for Saudi Aramco. There is a lot of growth potential. We are in discussions with other companies as well, including Reliance Industries." Officials in charge of the Ratnagiri project said they were hopeful plans will move ahead soon.

"We are positive about the progress," said B. Ashok, CEO of Ratnagiri Refinery & Petrochemicals. "The location was a bottleneck, and that has been cleared. The refinery will still be in Maharashtra, and the government has assured us a coastal location. We plan to start work on the refinery by next year and we are confident that the plant will be commissioned as per our plan by 2025."

Building a large downstream presence in India could help the world's largest crude exporter defend its position in the fast-growing Asian economy.

Earlier in the week, India adopted a new upstream policy framework to attract more foreign investment.

The new framework moves away from revenue maximization to production maximization, with a focus on attracting international oil companies like Aramco.

The Indian cabinet, chaired by Prime Minister Narendra Modi, decided Tuesday to give 66 fields of national oil companies to private operators for increasing the production.

RELIANCE ON SAUDI OIL

India Prime Minister Narendra Modi said Saudi Arabia will be a strategic partner for India's energy security in the coming years. "Saudi Arabia's participation in the world's biggest refinery and strategic petroleum reserve projects takes our relationship beyond the buyer-seller relationship in the energy sector," Modi said.

Saudi Arabia has been India's top oil supplier for the past few years. Volumes have occasionally been displaced by a rising flow of crude imports from Iraq, but India's imports of Saudi crude have increased steadily, coinciding with a decline in Iran imports due to US sanctions on Iran.

India imports around 800,000 b/d of oil from Saudi Arabia, Nasser said.

Aramco's major financial commitment to India's downstream sector could intensify the battle for market share in the major Asian consumer.

"We are very happy with the demand growth we are seeing from India," Nasser said.

S&P Global Platts Analytics expects India oil products demand growth of around 260,000 b/d in 2019, compared with an estimated growth of 195,000 b/d in 2018.

India's total annual refining capacity stands at around 232 million mt/year (4.6 million b/d), exceeding its annual demand of 200 million mt/year, and is expected to reach 458 million mt by 2040, according to the International Energy Agency.

India will require around 10 million b/d of refining capacity to meet its annual demand in 2040, according to the oil ministry.

--Ratnajyoti Dutta, newsdesk@spglobal.com

--Sambit Mohanty, sambit.mohanty@spglobal.com

--Edited by Jim Levesque, jim.levesque@spglobal.com