Saudi Push Into Indian Refining Is Stalling Over Crude Supply
Saudi Arabia's progress in securing investment in two oil refineries in India is being held back by a lack of consensus around crude supply, according to people familiar with the matter.
The nations agreed last month to collaborate on the two plants, as the largest oil exporter seeks to tap a massive market that will help drive global demand growth.
But the early-stage discussions have stalled as Saudi negotiators push to supply half of the crude needed by the processors at official selling prices that are often above market rates, the people said, declining to be named due to the sensitivity of the talks.
India wants Saudi's share of supply to be closer to its desired 20% stake in the ventures — and at a discount to so-called OSPs, the people said.
India's oil ministry and the local project partners — Bharat Petroleum Corp. Ltd. and Oil and Natural Gas Corp. — didn't reply to emails seeking comment. Saudi Aramco did not immediately respond to a request for comment.
State-owned Saudi Aramco is looking to help set up multibillion-dollar refineries in high-growth nations including China and India, as well as in Southeast Asia, to secure demand for its crude and ensure stability during market volatility, according to its latest annual report. Its weighted average share in overseas processors in 2024 was 35% but it supplied an average 53% of the crude they used, according to the document.
The exporter is also looking to claw back market share. Saudi Arabia, the de-facto leader of the OPEC+ producer group, was once India's largest oil supplier but has seen its position in the market decline as discounted imports from Russia increase.
A failure to agree on the projects would also be a diplomatic blow. Saudi Crown Prince Mohammed bin Salman — who announced the ventures at a meeting with India's Prime Minister Narendra Modi in Jeddah — had in 2019 pledged $100 billion of investments in India, but just a 10th of that has materialized.
A proposed $60 billion refinery planned by Aramco, Abu Dhabi National Oil Co. and India's state firms, didn't materialize due to land acquisition issues. Plans to buy a 20% stake in billionaire Mukesh Ambani's Reliance Industries also fell through.
That has increased pressure on both sides to finalize the investments in the new processors — BPCL's proposed refinery and petrochemical complex on the east coast and ONGC's on the west coast in Gujarat, the people said. However, without an agreement on discounted supplies, the Indian refiners see little reason for the Saudis to take a stake, especially as they can easily raise debt from local banks, they said.
Saudi Arabia is also proposing to take a stake of as much as 15% in Indian Oil Corp.'s Panipat refinery, one of the people said, a plan which the Indian government plans to study.
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