India eyes funds from Saudi Arabia for strategic oil reserves, refinery project

India has sought investment from Saudi Arabia to invest in its emergency crude oil reserves that will act as a buffer against contingencies like volatility in oil prices and supply disruptions for the world's third-largest oil consumer.

Oil Minister Dharmendra Pradhan discussed Saudi's participation in the Indian Strategic Petroleum Reserve Program at a meeting with his Saudi counterpart Khalid Al Falih who visited India second time in three weeks on Saturday, a government statement said on Sunday. The two ministers also talked about resurrecting a $44 billion (Rs 3.08 lakh crore) refinery project after the BJP-ruled Maharashtra government denied land at the initial site.

"The (two) ministers reviewed various Saudi investment proposals in the Indian oil and gas sector, including the urgent steps to be taken to expedite the implementation of the first joint venture West Coast Refinery and Petrochemical Project in Maharashtra, estimated to cost $44 billion, which will be the largest greenfield refinery in the world," an oil ministry statement said on March 10.

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Oil Minister Dharmendra Pradhan had a detailed discussion with Khalid Al Falih who visited regarding the 60 million tone (MT) a year mega oil refinery cum petrochemical complex, which was initially allocated land in Ratnagiri district of Maharashtra but the allocation was denotified by the state government earlier this month, as a part of electoral understanding between the ruling BJP and Shiv Sena.

No alternate site of the project has yet been identified and the statement did not elaborate on steps to be taken for implementation of the project.

Saudi Aramco and its partner ADNOC of UAE have signed agreements to take 50 percent stake in the project. The remaining is held by public sector oil firms - IOC, BPCL and HPCL.

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India has built 5.33 MT of emergency storage enough to meet its oil needs for 9.5 days, in underground rock caverns in Mangalore and Padur in Karnataka, and Visakhapatnam in Andhra Pradesh.

It has allowed foreign oil companies to store oil in the storages on the condition that the stockpile can be used by New Delhi in case of an emergency. .

In Phase-II, India plans to build an additional 6.5 million tonne facilities at Chandikhol in Odisha and Padur, which is expected to augment the emergency cover against any supply disruption by another 11.5 days.

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India, which meets 83 percent of its oil needs through imports, built the storages as insurance for any disruption in supplies. It has the right of first refusal to buy the crude oil stored in the facilities in case of an emergency.

Saudi Arabia is the second largest supplier of crude and LPG to India. In 2017-18, India's crude oil imports from Saudi Arabia were 36.8 MT, accounting for 16.7 percent of its total imports.

(With inputs from agency)