Rosneft vs Saudi Aramco vs Reliance: Global oil war to play out in India this time

Saudi Arabia's oil giant Saudi Aramco signed on dotted lines on Wednesday to build a $44-billion giant refinery and petrochemicals complex at Ratnagiri in Maharashtra. It will be the one of the largest foreign investments in India, that too after decades-long effort to bring global oil giants to the country.

Saudi Aramco said in its press statement that the refinery will be handling up to 1.2 million barrels of oil a day. It will hold 50 per cent stake in the refinery while the rest will be held by Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation.

At present, Reliance Industries' (RIL) facility in Jamnagar refines around 1.24 million barrels of oil a day. It includes two refineries, which commissioned in 1999 and 2009. The total cost for building two refineries at that time was $12 billion for RIL. Saudi Aramco also plans petrochemical facility in Maharashtra. Still, the experts say that the $44 billion cited in the document as so high. However, the entry of Saudi Aramco will surely change the refining market dynamics in the country.

With the new investment, the country will get three oil biggies with substantial business interest in the country. British Oil giant BP Plc was the first one that entered the country in 2011 with a sizable $7-billion investment in the upstream business of Reliance. It picked up 30 per cent stake in the exploration and production (E&P) assets of RIL, including the ones in Krishna Godavari (KG) Basin. The fact is that BP had to write off its value of investment in KG D6 block by $790 million in 2014, besides another $830 million in impairment charges.

Before the tie up with BP, RIL had a partner in its second refinery in Jamnagar --- Chevron. The American oil giant picked up 5 per cent stake in Reliance Petroleum in 2006 with a plan to increase its stake to 29 per cent. However, the collaboration failed to widen its scope and Chevron sold its stake back to RIL in 2009.

It was Russian oil behemoth Rosneft's entry into India in 2017, when it bought out Essar Oil's refinery at Vadinar, Gujarat, and the related assets for $12 billion had rekindled India's oil hopes after a long break. Russia is the largest crude oil producer in the world, followed by Saudi Arabia. It is now quite clear that these two biggies --- through Rosneft and Saudi Aramco --- want to create markets for their crude oil in the world's fastest growing energy market, India. According to International Energy Agency (IEA), the largest contribution to global energy demand growth -- almost 30 per cent -- comes from India, and its share of energy use will rise to 11 per cent by 2040.