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India signs deal with Saudi Arabia for strategic oil reserves & retail matters

Saudi Arabia has also expressed interest in picking up the government’s stake in BPCL, official sources said. Sources said Aramco is currently evaluating its Indian investments and views buying out BPCL as a good opportunity.

, ET Bureau|
Oct 29, 2019, 11.59 PM IST
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Saudi Aramco is also expected to partner in Modi government's mega project, the West Coast Refinery, worth over Rs 4 lakh crore.
RIYADH : India’s energy partnership with the world’s biggest oil producer that will enable energy security in the long term took a leap forward on Tuesday with a bilateral deal to build emergency crude reserves as a buffer against volatility in oil prices and supply disruptions for Asia’s third largest economy.

Indian Strategic Petroleum Reserves Limited signed an agreement with Saudi Aramco to lease part of the 2.5 million-tonne Padur storage in Karnataka.

India has already built 5.33 million tons of underground reserves in three locations, which can meet about 10 days of the country’s oil needs. Delhi plans two new reserves with a combined capacity of 6.5 million tons, sufficient to cover for an additional 12 days.

The deal with the state-run Saudi Aramco was signed on the occasion of the visit of PM Narendra Modi. UAE has also contributed to the petroleum strategic reserves in India.

The deal on strategic oil reserves was not the only outcome. The Middle East unit of India’s top refiner and fuel retailer, Indian Oil Corp, signed a preliminary deal with Saudi Arabia’s Al Jeri Transport Company for cooperation in the downstream sector, including setting up fuel stations in the kingdom.

Saudi Arabia has also expressed interest in picking up the government’s stake in Bharat Petroleum Corporation (BPCL), official sources said. Sources said Aramco is currently evaluating its Indian investments and views buying out BPCL as a good opportunity.

Last month, RIL chairman & MD Mukesh Ambani had announced the decision to sell 20 percent stake of his firm’s oil-to-chemicals business to Saudi national oil company Aramco. Under the deal, Aramco will acquire a 20% stake in RIL’s petrochemical business for $15 billion.

While Reliance has the world’s largest and most modern integrated refinery complex, Saudi Aramco is the world’s largest oil producer. Aramco is currently in the process of an IPO that could value the company at $1.5 trillion to $2 trillion.

Saudi Aramco is also expected to partner in Modi government's mega project, the West Coast Refinery, worth over Rs 4 lakh crore.

The refinery is to be set up at Raigad in Maharashtra where the state government has initiated a move for the acquisition of around 600 acres of land. The project, expected to be completed within five years, will not only fulfil the country's future oil requirements, but also make India one of the top global players in the refinery sector.

Petroleum Minister Dharmendra Pradhan on September 8 had a fruitful meeting with Prince Abdul Aziz bin Salman, the new Saudi minister for energy, in Jeddah in this connection.

Modi had announced the mega plant during his first term in 2016. Initially, the outskirt of Ratnagiri was selected as the site for the mega project. However, farmers there launched an agitation to shift the project from the district.

In the wake of India's growing oil and energy needs, a mega refinery like the one on the west coast with an expected capacity of 60 mmtpa is vital and would cater to the country's future requirements.

In his interview to leading local English daily Arab News, Modi noted that Saudi Arabia is currently India’s second largest supplier of oil – providing about 18 % of its energy needs. “From a purely buyer-seller relationship, we are now moving toward a closer strategic partnership that will include Saudi investments in downstream oil and gas projects," Modi said.

“We value the Kingdom’s vital role as an important and reliable source of our energy requirements. We believe that stable oil prices are crucial for the growth of the global economy, particularly for developing countries. Saudi Aramco is participating in a major refinery and petrochemical project on India’s west coast. We are also looking forward to the participation of Aramco in India’s Strategic Petroleum Reserves," the PM said in his interview.
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