India’s refining industry – Cooperation with the Middle East: Together forever! – Part 4
Being geographical neighbors, India and the Middle East countries were destined to close cooperation. The oil refining industry is no exception, and there are reasons that are stronger than geographical proximity.
In recent years, India has demonstrated one of the world’s highest growth rates in the consumption of petroleum products. At the same time, India has traditionally been dependent on crude oil imports, and this dependence has increased even more – about 84% of all crude oil supplied is imported. When talking about regional supply structure, more than half of the crude oil processed at India’s refineries is of Middle Eastern origin (see Figure 4).
Source: BP, EPC
Figure 4 – India’s crude market, MMtpa
Middle Eastern petroleum companies are already present in the Indian refining sector. For example, National Iranian Oil Co (NIOC) through its Swiss unit, Naftiran Intertrade, owns a 15.4% stake in Chennai Petroleum Corp. Ltd. (CPCL), whose refining capacity is over 230 000 bpd.
In January 2019, Indian Oil Corp. Ltd. (IOCL) chairman Sanjiv Singh said that Iran has not ruled out participating in the $5.5 B expansion of CPCL’s 20,000 bpd Nagapattinam refinery. Its participation has been questioned after Indian refiners cut back their Iranian crude oil imports following US sanctions. However, Mr Singh's comments come a few days after the government exempted rupee payments to NIOC for crude oil imports from a withholding tax. The exemption will allow domestic refiners to settle about $1.5 billion of outstanding payments to NIOC through direct rupee payments and it has been expected that these payments could help Iran invest in Indian projects.
"Iran has always been positive with this (the new rules). I think they should be able to invest," Mr Singh told news agency Reuters, following a media conference.
Another example of Middle East companies' existing investments in Indian refining is Bharat Oman Refineries Ltd (BORL), a joint venture between Oman Oil Co (OOC) and Bharat Petroleum Corp. Ltd. (BPCL) that operates the Bina refinery.
In 2018, BORL completed an expansion of the refinery to 156,000 bpd from 120,000 bpd, but OOC did not invest in this expansion. Future BORL’ plans are expanding the refinery to 320,000 bpd, and the company is considering options for attracting other partners. One of the most likely investors in the further expansion of the refinery is Kuwait Petroleum International (KPI), the downstream arm of Kuwait Petroleum Corporation (KPC).
In addition to expanding existing capacity, Middle Eastern companies have announced their entry into greenfield projects in India.
In April 2018, Saudi Aramco signed a pact with a consortium of Indian oil companies – IOCL, HPCL and BPCL - to jointly develop and build a mega integrated refinery and petrochemicals complex, Ratnagiri Refinery & Petrochemicals Ltd. (RRPCL), in Maharashtra. The refining capacity of the complex will be 1,200 Mbpd and it will be integrated with the petrochemicals complex, capable of producing around 18 million tpa of petrochemical products.
The project execution is resisted by local farmers, whose land is planned to be purchased for the accommodation of the complex. According to the latest information, it is expected that the mechanical completion of the refinery will be achieved by the end of 2024 and full commissioning by the end of 2025.
The project cost is estimated at around $44 billion, and taking into account the 50% share of Saudi Aramco, investment in this project could be the largest foreign investment of the company. However, in June 2018 UAE’s Abu Dhabi National Oil Company (ADNOC) signed an initial pact to take a stake in the refinery. Bbased on a tweet of India’s Minister for Petroleum and Natural Gas, Dharmendra Pradhan, “State owned refiners IOCL, HPCL & BPCL will have 50% stake in the Ratnagiri Refinery. Aramco & ADNOC will have 25% stake each.”
ADNOC participation in the Ratnagiri Refinery project was noted in the speech of Dr. Sultan Ahmed Al Jaber, UAE Minister of State and Group CEO of ADNOC, at the India Energy Forum, which was held in October 2018.
Source: ADNOC
Dr. Al Jaber said: “The United Arab Emirates and India have long-enjoyed strong bonds of friendship, based on cultural, political and trading links between our two nations. This is especially true in the energy sector, where the relationship has advanced beyond a buyer-seller dynamic to that of strategic energy security cooperation.
“Energy cooperation is an important aspect of the UAE’s relations with India. We are keen to expand and deepen that relationship and believe there are mutually beneficial partnership and co-investment opportunities across our Upstream and Downstream value chains. ADNOC is ready to work with its existing and potential new partners to meet the growing demand for energy and petrochemical products in India.”
No doubt the words of Dr. Al Jaber can be attributed to prospects of cooperation not only between India and the UAE, but also to India’s cooperation with all countries in the Middle East.
Euro Petroleum Consultants is delighted to announce ADNOC as the Strategic Partner of Middle East Technology Forum for Refining & Petrochemicals - ME-TECH taking place February 26-28, 2019 in Abu-Dhabi
https://www.europetro.com/week/metech2019