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Saudi Aramco, the state-owned oil company of the Kingdom of Saudi Arabia, has signed a pact with a consortium of Indian oil companies to jointly develop and build a mega integrated refinery and petrochemicals complex, Ratnagiri Refinery & Petrochemicals Ltd.
(RRPCL), in Maharashtra. When completed, it will reportedly be the largest single-location refinery complex in the world. The memorandum of understanding (MoU) was signed on sidelines of the International Energy Forum (IEF) conference in the capital yesterday.
The strategic partnership brings together crude supply, resources, technologies, experience and expertise of these multiple oil companies with an established commercial presence around the world. Three state-owned oil marketing companies – IOCL, HPCL and BPCL – will own a 50 per cent stake in the joint venture while Saudi Aramco will hold the remaining half. It will reportedly supply at least 50 per cent of the crude to be processed at the planned refinery along with advanced technologies for the same. According to a statement by the Ministry of Petroleum & Natural Gas, Saudi Aramco may also seek to include a strategic partner to co-invest in the project.
Dharmendra Pradhan, the Union Minister of Petroleum and Natural Gas and Skill Development & Entrepreneurship, said that this project, with an estimated investment of over Rs 3 lakh crore, would bring huge benefits to the region and the entire country in terms of large-scale employment generation, direct and indirect, as well as all-round economic development.
According to the statement, a pre-feasibility study for the refinery has been completed, and the parties are now finalising the project’s overall configuration. The refinery will be capable of processing 1.2 million barrels of crude oil per day (60 million metric tonnes per annum). It will not only produce a range of refined petroleum products, including petrol and diesel meeting BS-VI fuel efficiency norms, but also provide feedstock for the integrated petrochemicals complex, capable of producing around 18 million tonnes per annum of petrochemical products.
Furthermore, the project will also include the development of associated facilities such as a logistics, crude oil and product storage terminals, raw water supply project as well as centralised and shared utilities. If things go to plan, RRPCL will go a long way in meeting India’s fast-growing fuels and petrochemicals demand.
Currently the country has a refining capacity of a little over 232 million tonne, against the domestic demand of 194.2 million tonne in fiscal 2017. According to the International Energy Agency, this demand is expected to reach 458 million tonne by 2040.
Saudi Aramco President and CEO, Amin H. Nasser, said that the MoU marks a significant development in India’s Oil & Gas Sector, adding that participating in this mega project will allow Saudi Aramco to go beyond the role of crude oil supplier to a fully integrated position which supports India’s future energy demands.
At the IEF conference, Saudi energy minister Khalid al-Falih had said that “Large as this project may be, it does not by itself satisfy our desire to invest in India. We see India as a priority for investments and for our crude supplies”. Along with pointing out that Saudi Aramco’s entry would bring lower cost of financing due to the company’s higher credit ratings, Falih had told reporters that the reforms introduced by the Modi government are “a game changer”. He had added that “the transparency, ease of doing business, removing some of the hurdles have facilitated investment flow”.
What’s left unsaid is that this move will give Saudi Arabia a new outlet for its oil. In fact, according to Reuters, buying stakes in refineries is the strategy that the kingdom has adopted to expand its market share in Asia and fend off rivals. Saudi Arabia is competing with Iraq to be India’s top oil supplier. That apart, Saudi Aramco, the world’s biggest oil producer, is moving to invest in refineries overseas to help lock in demand for its crude ahead of an initial public offering expected later this year, or the next.
Meanwhile, the protests from the region against the project have gotten louder with the signing of the MoU. The locals, mostly fishermen and farmers, have been opposing the project on the grounds that it would take away their livelihoods, disturb the ecology of the entire region, and expose the Konkan region to further industrial exploitation.
According to media reports, the Konkan region is feeling betrayed since state industries minister Subhash Desai not long ago had promised that the project “will not be imposed on the locals in any circumstances”. In February, Chief Minister Devendra Fadnavis, too, had said that the project would be launched, but only after talks with all the stakeholders. He had previously pointed out that the upcoming project “is a greener refinery than the one in Chembur, Mumbai”.
“The government has double standards and now stands exposed in front of the people of Konkan,” Satyajit Chavan, Convener, Committee for Opposing Destructive Projects in Konkan told The Hindu. “It appears as though successive governments are hell-bent on destroying the natural wealth and beauty of Konkan. The earlier government brought in the Jaitapur nuclear power project and now this government is set to force this oil refinery on us.”
With all political parties, including the ruling Shiv Sena, backing the locals, Chavan’s warning that the protest will only pick up steam here on seems no idle threat. However, B Ashok, the CEO of RRPL, reportedly claimed that the project is well on its course and is expected to be ready by 2025.