Saudi Aramco is poised to acquire 20% stakes in two major refineries being developed by India’s state-owned companies, ONGC and BPCL, situated on the west and east coastlines of the country, respectively. This strategic move marks a significant milestone in Aramco’s long-anticipated entry into the Indian market as an investor. As a key crude oil exporter to India for decades, Aramco’s investment in these downstream projects is expected to strengthen the economic ties between the two nations.

Significant Investments in Indian Refining Capacity

Both refining facilities are set to boast an impressive capacity to process 12 million tonnes of crude oil annually, with each project estimated to cost around ₹1 lakh crore (approximately $12 billion). Although precise details are still being finalized, initial projections suggest that Aramco’s investment could reach around ₹24,000 crore (about $2.8 billion), including a financial structure that balances debt and equity. There is potential for total investments to increase to $5 billion over time.

• Debt-equity ratio: Projects are likely to maintain a 7:3 debt-equity ratio.
• Initial Investment: Around ₹24,000 crore targeted for both refineries.

ONGC has confirmed its collaboration with Aramco for the refinery in Gujarat, while BPCL, which is developing the facility in Andhra Pradesh, has not yet responded to inquiries regarding the partnership.

A Historic Agreement for Energy Cooperation

An in-principle agreement was established during Prime Minister Narendra Modi’s visit to Riyadh on April 23, paving the way for the development of these refineries. Senior officials have hailed Aramco’s readiness to invest as a “big milestone” for India, aligning with the country’s ambition to boost its refining capabilities and become a leader in the Asian energy sector. This investment is part of Saudi Arabia’s broader commitment to inject $100 billion into diverse sectors in India over the coming years.

Saudi Arabia has consistently been a dependable oil supplier for India, even though its share of India’s total oil imports has slightly decreased from 20% to 14% due to increased imports from Russia in recent years. Notably, Aramco values its relationship with Indian buyers, who have historically honored their oil contract commitments, granting the company greater confidence in its investments.

Technical Expertise and Long-Term Supply Stability

Beyond financial investments, Aramco is expected to contribute its extensive technical expertise in refining processes and ensure a steady supply of oil to the new refineries, enhancing their operational reliability.

It’s noteworthy that India has not seen a new refinery constructed since the Paradip facility, developed by Indian Oil Corporation, in 2016.

Previously, Aramco sought to invest approximately $15 billion in Reliance’s refinery business; however, that deal faltered due to disagreements over pricing strategies and Reliance’s hesitance to commit to increased oil purchases from Aramco.

Recent Financial Insights

In a recent financial report, Aramco announced a $106.25 billion profit for 2024, reflecting a 12% decrease from the previous year, attributed to lower energy prices. With a market valuation nearing $2 trillion, Aramco remains the world’s largest oil company.

For comparison, ONGC’s market capitalization stands at ₹3.07 lakh crore (approximately $36.14 billion), while BPCL’s market cap is ₹1.35 lakh crore (around $15.8 billion).

This collaboration between Aramco and Indian companies not only signifies a crucial step in energy sector investment but also reinforces the growing partnership between Saudi Arabia and India in the global energy landscape.