Context:
India and Saudi Arabia have made significant strides in their collaboration to enhance energy security and market stability. Both countries have agreed to set up two new refineries in India and jointly work toward enhancing global oil market stability. This announcement comes after Prime Minister Narendra Modi’s brief visit to Saudi Arabia, which was cut short due to the Pahalgam terror attack.
Refinery Establishments and Investments
- Two Refineries in India: Saudi Arabia and India have agreed to collaborate on building two refineries in India. These refineries will be part of Saudi Arabia’s broader $100 billion investment commitment to India across sectors like energy, infrastructure, technology, and fintech.
- Saudi Aramco’s West Coast Refinery: While Saudi Aramco was initially focused on establishing a mega West Coast Refinery in Maharashtra with a capacity of 60 MMTPA, progress has been slow. The project plans are now likely to shift toward establishing smaller refineries with capacities of around 20 MMTPA.
Enhancing Energy Supply and Security
- Crude Oil and LPG: In FY2023-24, Saudi Arabia accounted for 14.3% of India’s crude oil imports and 18% of India’s LPG shipments. Both countries are now focused on enhancing cooperation to stabilize global energy markets and ensure secure supply chains for energy sources worldwide.
- Energy Security: Both India and Saudi Arabia emphasized the importance of energy security for all sources of energy globally, particularly in the wake of shifting geopolitical dynamics.
Bilateral High-Level Task Force and Investments
- Task Force Progress: The two nations have made progress in key sectors such as taxation, investment, and supply chain development. The Bilateral Investment Treaty (BIT) is expected to be finalized soon to further strengthen these economic ties.
- Strategic Reserve and Green Hydrogen: Collaboration on India’s Strategic Petroleum Reserve Program and the development of green hydrogen technologies is also a significant focus of their cooperation. The countries plan to explore joint ventures in hydrogen transport and storage technologies as part of a shared effort to stimulate demand.
Labor, Human Resources, and Specialized Industries
- The countries have also agreed to expand cooperation in labor and human resources sectors, with an emphasis on specialized industries and innovative uses of hydrocarbons.
Long-Term Impact of the $100 Billion Investment
- Saudi Arabia’s $100 billion investment commitment to India is a pivotal element in this collaboration. The funds will be directed towards a wide range of sectors, including petrochemicals, infrastructure, and digital infrastructure, strengthening the economic ties between the two nations.
