India laments US$70 crude as Saudi Arabia eyes plant

Nation prefers prices at US$50 in order to manage finances better

NEW DELHI: Oil’s rally to US$70 a barrel is threatening to clip India’s economic wings at a time when Saudi Arabia is looking to join a US$30bil refinery project in the world’s fastest growing market.

The nation wanted to see prices at about US$50 a barrel in order to manage its finances better, Oil Minister Dharmendra Pradhan said in an interview.

Meanwhile, Saudi Arabia – which is said to be aiming for oil near US$80 to pay for its own crowded policy agenda – is planning to sign a deal to participate in a refinery on India’s west coast as part of its strategy to secure sources of consumption for its crude.

While Indian Prime Minister Narendra Modi’s administration reaped the benefits of the biggest price crash in a generation during its first term in power, oil is recovering as the government gears up for elections in 2019.

Saudi Arabia, the world’s biggest crude exporter, is preparing for an initial public offering of its state-run producer and leading efforts by Opec to curb output and eliminate a global glut that spurred oil’s decline.

“We are a very price-sensitive consumer,” Pradhan said. “From Indian consumers’ point of view, I will be more than happy if the price is around US$50 a barrel.”

Saudi Arabian Oil Co, known as Saudi Aramco, has agreed in principle to join a proposed 1.2 million barrel a day refiner on India’s west coast, he added.

Saudi Aramco’s chief executive officer Amin Nasser would sign a memorandum of understanding yesterday for the project with RRPC, or Ratnagiri Refinery & Petrochemicals, a consortium consisting of state-run refiners Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, said a person familiar with the matter.

Aramco may take a 50% equity stake in the project and could bring in another strategic investor, the person said.

“Things are on the table, we are discussing with each other,” Pradhan said, referring to Saudi Arabian participation in the project. “It has to be a win-win situation for both. It must be acceptable to them, it must be profitable for me also.” He confirmed yesterday that a preliminary deal would be signed with Aramco.

Saudi Arabia has been edged out as the top oil supplier to India amid an intensifying race among producers to retain their most-prized markets.

India, which imports about 80% of its crude requirements, has been diversifying its sources of oil supply and is seeking more favourable terms from producers in the Middle East.

The potential partnership in India would be an extension of Aramco’s strategy to lock up market share by investing in refineries in Asia, the region that’s driving global oil demand growth. — Bloomberg