Prime Minister Narendra Modi’s recent visit to Saudi Arabia has reignited discussions on the long-delayed $50 billion West Coast refinery project, signaling a renewed commitment to bolster energy ties between the two nations.
During the visit, both countries agreed to expedite the implementation of the refinery project, which is a trilateral cooperation involving Saudi Aramco, Abu Dhabi National Oil Company (ADNOC), and Indian companies. The project, once completed, is expected to be the largest greenfield refinery in the world implemented in a single phase.
Saudi Aramco’s Strategic Investments in Indian Refineries
Saudi Aramco is actively seeking to invest in two new refineries in India, aiming to secure a stable market for its crude oil amidst a declining share of Indian oil imports and increased competition from cheaper sources like Russia. The state-controlled oil giant is in discussions with Bharat Petroleum Corp (BPCL) for a refinery in Andhra Pradesh and with Oil and Natural Gas Corp (ONGC) for a project in Gujarat. Aramco proposes to supply oil triple its stake in each project and seeks flexibility in crude procurement.
Reviving the West Coast Refinery Project
The West Coast refinery project, initially announced in 2019, had faced delays due to land acquisition issues and valuation disagreements. However, during Modi’s visit, both nations expressed full support for the early implementation of the project. A joint task force has been established to monitor progress and channel investments, with Saudi Arabia reaffirming its commitment to invest $100 billion in India, half of which is earmarked for the refinery.
Expanding Bilateral Energy Cooperation
Beyond the refinery project, India and Saudi Arabia have agreed to elevate their hydrocarbon relationship into a comprehensive energy partnership. This includes cooperation in areas such as natural gas, strategic petroleum reserves, and renewable energy. Both countries have also signed eight agreements to boost cooperation in various sectors, including digitization, investment, and infrastructure.
Strategic Implications and Future Outlook
The renewed focus on energy collaboration between India and Saudi Arabia comes at a time when global oil dynamics are shifting, with countries diversifying their energy sources and investing in renewable alternatives. For India, securing a reliable energy partner is crucial to meet its growing energy demands. For Saudi Arabia, investing in downstream projects in India provides an opportunity to maintain its market share and strengthen bilateral ties.
