Aramco: India is a pri­or­ity, not a choice

Arab News - - OPINION - NASER AL-TAMIMI | SPE­CIAL TO ARAB NEWS

INDIA and Saudi Ara­bia are work­ing on el­e­vat­ing their re­la­tion­ship to a new level as the King­dom’s state-owned oil gi­ant Saudi Aramco has “mega in­vest­ment” plans in India’s en­ergy sec­tor. Aramco is look­ing to cre­ate a fully in­te­grated busi­ness in India and is in­ter­ested in buy­ing a stake in the world’s largest oil re­fin­ery planned for the west coast of India. “We in­tend to strengthen part­ner­ships with In­dian en­ergy firms — be­yond the sup­ply of crude and LPG — and in­vest in re­fin­ing, dis­tri­bu­tion, re­tail and petro­chem­i­cals,” Saudi Aramco Pres­i­dent and CEO Amin H. Nasser said last week at the In­dian En­ergy Fo­rum by CERAWeek in New Delhi.

India is Saudi Ara­bia’s fourth-largest oil ex­port market (after Ja­pan, US, and China) and the King­dom is strug­gling to main­tain its po­si­tion as the top oil sup­plier to its im­por­tant Asian cus­tomer. In­deed, Aramco faces fierce com­pe­ti­tion from pro­duc­ers within the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) to re­tain one of its most prized mar­kets.

To be sure, Saudi Ara­bia has been usurped by Iraq as the top oil sup­plier to India since the start of 2017. Iraq’s ex­ports to India have dou­bled since 2014 and In­dian im­ports from Iraq av­er­aged 852,862 bar­rels per day (bpd) for Jan­uary-Au­gust 2017, against 768,652 bpd for Saudi Ara­bia, ac­cord­ing to the lat­est data by In­dian cus­toms.

Aramco is in­ter­ested in buy­ing a stake in the planned a 60 mil­lion tons a year 1.2 mil­lion bpd) re­fin­ery in Ma­ha­rash­tra, India’s Oil Min­is­ter Dhar­men­dra Prad­han said at CERAWeek. At the heart of Aramco’s in­vest­ment strat­egy in In­dian re­finer­ies is a de­sire to lock up mar­kets for its oil ex­ports, which was the same strat­egy that the com­pany has pur­sued in its main mar­kets such as the US, China and cur­rently in In­done­sia and Malaysia.

Ac­knowl­edg­ing India's im­por­tance as one of the largest and fastest grow­ing economies in the world, Aramco ex­pressed its readi­ness to en­gage New Delhi and ful­fil its oil re­quire­ments on a long-term ba­sis. In this con­text, the in­au­gu­ra­tion of the new Aramco of­fice in New Delhi this month sig­ni­fies the com­pany’s in­ter­est in se­cur­ing its market share and ex­pand­ing its pres­ence in India. “India has all the signs of a pros­per­ous econ­omy that is on the move. This is a market of in­vest­ment pri­or­ity and not a choice any more,” Nasser said.

In broader eco­nomic terms, the King­dom was the fourth-largest trade part­ner of India in 2016. How­ever, the value of India-Saudi Ara­bia trade last year de­clined to $23.5 bil­lion, a de­crease of over 17.2 per cent from more than $28 bil­lion in 2015, ac­cord­ing to the In­ter­na­tional Mone­tary Fund. The de­cline can be at­trib­uted mainly to low oil prices.

For Saudi Ara­bia, India was the third-largest market for its ex­ports, ac­count­ing for over 10 per­cent of its global ex­ports. In terms of im­ports by the King­dom, India ranked sixth and was the source of more than 3.7 per­cent of the King­dom to­tal im­ports. How­ever, Saudi Ara­bia's ex­ports of oil and petro­chem­i­cal prod­ucts to India ac­counted for about two-thirds of the to­tal trade be­tween the two coun­tries.

In­deed, co­op­er­a­tion in the en­ergy sec­tor is a driv­ing force in Saudi-In­dian ties. Saudi Ara­bia is the world’s largest oil ex­porter, whereas India has be­come the world’s third-largest oil con­sumer and im­porter. India im­ported 64.3 per cent (or 2.6 mil­lion bpd) of its oil from the Mid­dle East and Saudi Ara­bia was India’s largest oil sup­plier in 2016, at 18.9 per­cent of oil im­ports (about 782,000 bpd).

Look­ing for­ward, India could be­come the sec­ond-largest oil im­porter (after China) over the next two decades. Con­se­quently, crude oil im­ports from Saudi Ara­bia are ex­pected to in­crease in the fu­ture. “By 2040, India is likely to be among the fastest grow­ing oil mar­kets, with de­mand al­most dou­bling to about 10 mil­lion bpd,” Nasser said.

Dr. Naser Al-Tamimi is a UK-based Mid­dle East re­searcher, po­lit­i­cal an­a­lyst and com­men­ta­tor with in­ter­ests in en­ergy pol­i­tics and Gulf-Asia re­la­tions. Al-Tamimi is au­thor of the book “China-Saudi Ara­bia Re­la­tions, 1990-2012: Mar­riage of Con­ve­nience or Strate­gic Al­liance?” He can be reached on e-mail: naser­tamimi@hot­mail.co.uk. Twit­ter: @naser­tamimi

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