Saudi Aramco may pick up 20% stakes each in the two new large refineries being planned by India’s state-run ONGC and BPCL on the country’s west and east coasts respectively. The move would end the long wait for the world’s largest oil and gas company’s entry into India as an investor. Aramco has been one of the major exporters of crude into the country for decades, and downstream investments in the country are seen to cement the ties.
The two refining facilities, each with a capacity to process 12 million tonne of crude annually, will be set up at a cost of roughly Rs 1 lakh crore each. Though the details are still being worked out, Aramco’s initial investment in both the units could be around Rs 24,000 crore (around $2.8 billion at current exchange rate), including a debt component commensurate with the equity, informed sources told FE. The investments could later be jacked up to $5 billion.
Both projects would likely have a debt-equity ratio of 7:3.
Sources in ONGC confirmed the partnership with Aramco in its proposed refinery in Gujarat, and the likely size of initial investment by the company. BPCL, which is setting up the refinery in Andhra Pradesh, did not reply to FE’s queries till late Wednesday.
While an in-principle agreement was arrived at between the two countries to set up the refineries in India during prime minister Narendra Modi’s visit to Riyadh on April 23, the modalities are being worked out.
Senior government officials described Aramco’s willingness to invest in the ventures as a “big milestone” as India aims to set up a chain of new oil refineries and emerge as the leader in Asia in this line of business. This will be part of Saudi Arabia’s commitment to invest $100 billion in India over the next few years in various sectors.
Saudi Arab has been a reliable and stable oil supplier for India, even though its share in India’s total oil imports has come down to around 14% from 20% due to a rise in imports from Russia in the last couple of years.
Saudi Arabia has appreciated that Indian buyers have never reneged on their oil contract commitments, giving Aramco comfort to invest in India.
“Besides investment, Aramco will bring the best technical know-how in refining and commitment of stable oil supplies to the refineries given their stake in the new ventures,” an official said.
It’s almost a decade since a new refinery was set up in India at Paradip in Odisha in 2016 by Indian Oil Corporation.
Earlier, Aramco’s plan to buy a stake in Reliance’s refinery business with an investment of around $15 billion reportedly failed to take off due to differences over the “Asian premium” and Reliance’s reported reluctance to commit to higher oil purchases from Aramco.
Asian premium is the effective high price that Asian countries such as India and China pay to import crude from Oil Producing and Exporting Countries (OPEC).
Aramco reported a $106.25 billion profit in 2024, down 12% from the prior year on lower energy prices. With close to $2 trillion market valuation, it is the world’s largest oil company.
ONGC’s market cap is Rs 3.07 lakh crore ($36.14 billion) while BPCL’s market cap is RS 1.35 lakh crore ($15.8 billion).