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High-stakes race for Aramco refinery

New Delhi, May 15: Hindustan Petroleum Corporation and Indian Oil will have to compete with global majors Shell, Exxon-Mobil and Sinopec of China for a stake in Saudi Aramco’s Yanbu refinery project on the Red Sea coast.

Oil industry sources said the 20-million-tonne-per-annum oil refinery will require an investment of $3-3.5 billion.

“While Saudi Aramco is considering India’s proposal for a criss-cross of investments, it has also sounded Shell, Exxon-Mobil and Sinopec on the refinery project,” a senior oil industry official told The Telegraph.

The global oil giants command a formidable clout with the Saudi authorities and if they are keen on the project, it would make the task of Indian companies picking up a stake that much more difficult.

Saudi Aramco has evinced an interest in picking up a share in Indian Oil’s Paradip refinery project apart from Hindustan Petroleum Corporation’s Vizag refinery as a part of the criss-cross investments that petroleum minister Mani Shankar Aiyar is trying to promote between India and Saudi Arabia.

The Saudi Aramco investment could even result in increasing the capacity of the Paradip refinery for exporting petroleum products to the eastern market.

Similarly, the Hind Petro investment in the Yanbu refinery would be used as an export base for feeding the western market. It would also strengthen economic ties between India and Saudi Arabia.

Aiyar expects such investments to lead to assured supplies of crude from Saudi Arabia, which has huge oil reserves and is the single largest source of Indian crude imports.

Saudi Arabia accounts for as much as 26 per cent of India’s total crude imports. Currently, around 25 million tonnes of crude is imported from the West Asian country and India has recently obtained an assurance that this could be increased to 50 million tonnes in the next 10 years, if the need arose.

In the upstream sector, ONGC-Videsh has been allowed to bid for natural gas exploration by the Saudi government, which would be put on offer towards the end of this year.

However, here again the Indian company would have to compete with global oil majors.

Saudi Aramco is also expected to hold further discussions with Indian Oil on setting up commercial storage facilities via joint-ventures in India.

The proposal was mooted earlier, but Saudi Arabia did not evince sufficient interest at that time. The Saudi company has similar oil storage facilities in Rotterdam, South Korea and the Caribbean.

Saudi Arabia and India are looking for co-operation through the entire value chain of natural gas, which includes gas processing into petrochemicals and liquefaction for exports. A team from Gail had also accompanied the minister on his visit to Riyadh in March this year.

The setting up of a fertiliser plant in Saudi Arabia in partnership with National Fertiliser Ltd is also under consideration. The plant would be powered by Saudi gas.

A similar factory ' the Hindustan Fertiliser plant ' is in Oman. Saudi Arabia is looking for Indian co-operation in building an aluminium plant as well.

It remains to be seen whether this entire gamut of investment possibilities can help tilt Saudi Aramco India’s way on the Red-Sea refinery project.

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