India refinery deal will boost Adnoc, Aramco bottom-lines
MOVE ENSURES GCC OIL MAJORS SECURE MARKETS FOR THEIR CRUDE IN HIGH-GROWTH MARKET
The investments by Abu Dhabi National Oil Company (Adnoc) and Saudi Aramco in the development of India’s $44 billion (Dh161.6 billion) mega-refinery and petrochemicals complex in Ratnagiri fit well with both companies’ strategic objectives to diversify their business and make profits, according to analysts.
Adnoc, Saudi Aramco and a consortium of three Indian oil companies signed a strategic partnership agreement on Monday in New Delhi to jointly develop and build the new refinery on India’s west coast.
Under the deal, Saudi Aramco and Adnoc will own 50 per cent of the new joint venture company — Ratnagiri Refining and Petrochemical Company Ltd — with the remaining 50 per cent owned by the Indian consortium consisting of the Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd, and the Hindustan Petroleum Corporation Ltd.
The development comes as India is set to replace China as the major engine for growth over the coming decades, with high demand for petrochemical products expected.
Expansion strategies
“The recent joint investment of Saudi Aramco and Adnoc in the $44 billion Ratnagiri complex is a result of both companies’ expansion strategies and [them] capitalising on strategic markets abroad,” Dr Abdul Wahab Al Sadoun, secretary-general of the Gulf Petrochemicals and Chemicals Association (GPCA), told Gulf News in an email.
“India is the second-largest importer of GCC crude oil and accounts for the second-largest share in chemical imports in the region, at 16 per cent. It is also one of the world’s fastestgrowing markets for refining and chemical products, accounting for a significant share of global demand.”
He also added that investing in integrated refining and petrochemical complexes will maximise companies’ profit margins, and this is exactly what Adnoc and Saudi Aramco have done.
“By moving in this direction, the two companies are securing markets for their crude which will be refined in this high growth market, and by so doing they will realise the value added by moving further downstream. This is also in line with their integration business strategies and will drive the companies’ competitiveness at a global level.”
The partnership between Saudi Aramco and Adnoc marks a significant step in regional energy partnership and cooperation, bringing together two of the world’s leading national oil companies as strategic partners with the Indian consortium.
It will also combine their considerable expertise spanning crude supply, resources and technologies, along with an established commercial presence and global reach, according to the statement issued by Adnoc and Saudi Aramco.
Emma Richards, a senior oil and gas analyst at BMI Research, said the joint investment fits well with both companies’ strategic objectives.
Both are shifting their trade east — that’s been the case for a number of years, but the advent of shale and increasing length in the Atlantic market is adding impetus.” Emma Richards | Senior oil & gas analyst at BMI Research
Competitive market
“Both are shifting their trade east — that’s been the case for a number of years, but the advent of shale and increasing length in the Atlantic market is adding impetus,” she told Gulf News, adding that investing in downstream markets internationally helps producers secure an outlet for their crude.
“The market’s looking a lot tighter in the short- to medium-term, but longer term it looks increasingly competitive, so gaining this kind of a foothold is important. It also offers value down the supply chain and some diversification.”