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.
India could become the second-largest oil importer after China over the next two decades, so its crude imports from Saudi Arabia are likely to increase.
Dr. Naser Al-Tamimi
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: [email protected] Twitter: @nasertamimi