New Delhi – India has articulated its desire for Saudi Arabia’s energy behemoth, Aramco, to play a pivotal role in its ambitious 6.5 million metric tons (MMT) strategic petroleum reserve (SPR) program, aimed at solidifying ties with a crucial oil supplier, according to confidential documents unveiled to Reuters.
Discussions regarding Aramco’s participation in the SPR program have lingered for years, but recent events have provided fresh impetus. The turning point occurred after the meeting between Crown Prince Mohammed Bin Salman and Prime Minister Narendra Modi last month.
The Indian government, in an internal document, revealed, “Under Phase II of the Strategic Petroleum Reserves Program, the construction of two new facilities serving both commercial and strategic petroleum storage purposes, with a cumulative capacity of 6.5 MMT, has been sanctioned.” It further specified, “Saudi Arabia’s Aramco is being considered for participation in Phase II.”
Notably, Aramco has refrained from offering any official comment on this development, and the Saudi government has remained silent in response to email inquiries. Similarly, India’s key offices, including the Prime Minister’s Office, the Ministry of Oil, and the Ministry of Finance, have not provided any formal response.
In 2021, India made significant amendments to its SPR policy, permitting the commercial sale of crude to encourage private sector involvement in the construction of new storage infrastructure, a model akin to those adopted by nations such as Japan and South Korea.
As the world’s third-largest importer and consumer of oil, with over 80% of its requirements sourced from overseas, India has established strategic storage facilities at three locations in the southern region, capable of housing over 5 million tons of oil. These reserves serve as a buffer against potential supply disruptions.
Notably, the Abu Dhabi National Oil Co (ADNOC) has secured a lease for 750,000 tons of storage within the 1.5 million ton SPR located in the southern city of Mangaluru.
India has taken proactive measures to promote the second phase of its SPR program, conducting two road shows that garnered significant interest from major corporations, including Trafigura, British Petroleum, Petrochina, Hyundai, Gulf Energy, Glencore, and Shell, according to a government statement.
Commenting on the potential collaboration between India and Saudi Aramco, KPMG Partner Anish De remarked, “Facilitating investment in this context aligns economic and political interests. There exist compelling economic and political motivations for both nations to proceed.”
During the Crown Prince’s visit to India, Saudi Arabia unveiled plans for an investment facilitation office in India’s Gujarat International Finance Tec-City, a tax-neutral financial services hub. Moreover, India is actively exploring land acquisition for the development of a refinery and petrochemical project in western India, featuring the participation of both Saudi Aramco and ADNOC. The two governments will establish a task force to address challenges, including land acquisition, which has caused delays in a project originally conceived in 2018. Saudi Arabia has pledged a substantial $50 billion investment for this venture.
This endeavor marks a significant step towards fortifying economic and political collaboration between these two nations. It reflects a profound interest in deepening their partnership and furthering their collective economic goals.
[Disclaimer: This article is based on information from October 11, 2023, and is subject to change.]
