Aramco’s India deal is a win-win

▶ World’s biggest producer is seeking the largest consumers

At the beginning of this year, when oil prices climbed close to $70 per barrel, Saudi Aramco announced its intention to invest in a refinery in India.

In January, Amin Nasser, president and chief executive of the world’s biggest oil producing company, told

Nikkei Asian Review on a trip to Japan that Aramco was looking at additional investments in China, and India was a country it was giving “great consideration” to.

Even as Aramco scouted for places to list, its chief executive was also looking to pick up stakes in the refining and petrochemical sectors across Asia. A planned refinery in the western Indian state of Maharashtra was on the radar, as was a petchems complex along the eastern coast in the state of Andhra Pradesh.

Yesterday’s agreement to co-operate on the $44bn refinery in Ratnagiri in Maharashtra is the first real

The Ratnagiri refinery deal is the first real Saudi commitment to India’s downstream industry

Saudi commitment to India’s downstream industry, following an earlier exit by Aramco from a refinery in Punjab in the late 90s, as well as a lack of progress in its interest in another project in the state of Orissa.

Aramco’s priorities then were to increase its upstream capacities at home and prioritise market share in key export destinations.

At the time, India, the world’s third largest consumer of crude, was not encouraging large-scale foreign direct investment, as its bureaucratic set-up sustained by decades of socialist policy took a cautious approach to foreign investors.

The latest planned investment, however, proves to be a win-win for both – the oil exporter and refiners – both looking to maximise profit.

The world’s second-most populous nation accounts for 4 per cent of global oil consumption and is set to continue to consume at the rate of 4.5 per cent over the next 25 years, according to its Prime Minister Narendra Modi.

It therefore makes economic sense for Saudi Arabia, which saw its position as India’s top oil exporter displaced by Iraq last year, to come into agreement on large-scale refining and petchems complexes in the country.

Meanwhile for India, rising crude prices pose a threat to its economic growth and negotiating smart deals with the world’s top oil exporter sooner than later makes fiscal sense.