Saudi may finalise investment in Indian refineries upon feasibility report completion in 7-8 months: Govt source

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Two Indian state-run oil companies would complete detailed feasibility report (DFR) of the upcoming greenfield refineries in the next seven to eight months, post which a final decision would be taken on investment share of Saudi Arabia in these projects, a top government official told Moneycontrol.

Bharat Petroleum Corporation Limited (BPCL) and Oil and Natural Gas Corporation Limited (ONGC) are currently working on DFRs of their respective upcoming refineries in India. A DFR analyses the viability of a refinery and helps in finalising the total investment required for a project, as per the capacity of the plant.

“It usually takes a year for companies to complete DFR. So, basically 7-8 months from now they should complete it and then a call on investment could be taken (by Saudi Arabia),” the official said.

Moneycontrol had reported in February that state-run oil companies are in talks with Saudi Arabia for a crude oil deal, as part of the Middle-Eastern country’s investment plans in Indian energy sector.

As part of the deal, Saudi Arabia would supply crude oil to the upcoming greenfield refineries while also invest in the projects. Meanwhile, the oil companies are negotiating crude oil at discounted prices for their refineries.

BPCL’s nine million metric tonne per annum (MMTPA) is being set up in Andhra Pradesh’s Nellore district. Meanwhile, ONGC’s greenfield refinery is likely to be set up in Gujarat’s Jamnagar district, Moneycontrol had reported earlier.

In 2019, Saudi Arabia had signed a memorandum of understanding (MoU) with India and announced a plan to invest $100 billion in the country in sectors such as agriculture, infrastructure, manufacturing and energy. The investment plan, however, has not materialised yet.

The recent investment proposals by Riyadh in India’s upcoming refinery projects are seen as a part of Saudi’s earlier plans.

India is a huge market for Saudi Arabia’s crude oil, as New Delhi buys a significant portion of its oil requirements from Riyadh. Saudi—India’s traditional crude oil partner—is currently the third-largest oil supplier to New Delhi, after Russia and Iran.

As crude oil prices soften due to dampening global demand, Saudi Arabia is looking at oil deals to build itself a market and ramp up oil exports. Contrary to global trend, India’s oil demand remains strong and is expected to grow in the coming years.

Refining capacity expansion

India—which is the fourth largest refiner in the world—has been working towards further increasing its refining capacity as the country’s fuel demand remains robust.

The Indian government’s initial plan was to set up a 60 mmtpa refinery in Maharashtra’s Ratnagiri, which later had to be shelved due to land acquisition issues.

After the state-run Oil Marketing Companies (OMCs) failed to set up the said plant, India’s oil minister Hardeep Singh Puri said that the companies would instead build smaller refineries of 20-25 mmtpa capacity, to avoid land acquisition issues.

As India aims to increase its refining capacity to 450 mmtpa by 2030 from around 250 mmtpa currently, the government has been focused on commissioning new oil refineries while also expanding the capacity of existing ones.