By Ahmed Khan, The Rahnuma Daily Editor-In-Chief (Online English)
HYDERABAD (RAHNUMA) PM Modi’s recent visit to the Kingdom of Saudi Arabia to participate in the Strategic Partnership Summit, and the Future Investment Initiative at Riyadh, has started bearing fruits with oil giant ARAMCO trenching hopes through venturing into mammoth $60-billion USD oil refinery project at Maharashtra.
Following an MoU between Saudi ARAMCO and Indian Strategic Petroleum Reserves Ltd., inked during the summit at Riyadh last week, the Oil Giants have embarked on to expand its business in India through establishing an oil refinery at Maharashtra that is seen as a major sign of cementing bilateral ties between both the countries by propelling energy partnerships further.
The issue of the refinery to be built by two Oil Giants Saudi-Aramco and Abu Dhabi National Oil Company (Adnoc-UAE) together with the Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPC) and Bharat Petroleum Corporation (BPC) has come up for talks between PM Modi and the Saudis recently.
While the issue of land acquisition is still pending, the turn of events are indicating that the issue is not paramount enough to stall the efforts of steering the economy of both the countries toward making unprecedented strides.
The refinery project was originally based at Ratnagiri, Maharashtra, but was retracted after local mango farmers raised opposition to parting with their land for the project. Another interesting ingredient added to the mix is today’s news of presidential rule imposed in Maharashtra state. After the major parties failed to come into agreement and form the governmen, the governor was prompted to handover the state directly under the control of central government.
Reiterating his commitment towards taking the economic to a new height Amin H. Nasser, the President and CCEO of Saudi Aramco, said the “company is determined to make strides towards becoming world’s pre-eminent integrated energy and chemicals giant. We have contributed for one in every eight barrels of crude oil produced globally over the last three years and the liquids reserves were five times larger than the combined proved liquid reserves of the Five Major IOCs by the end of last year. Thus, we are a firm and persistent contributor to the world’s energy.”
As per the prospectus issued by the oil giant recently, Saudi-ARAMCO’s refining operations in the kingdom, including its domestic affiliates, accounted for 62% of its net refining capacity in 2018. In addition to its domestic focus, the Company is focusing its downstream investments in areas of high-growth, including China, India and Southeast Asia, material demand centres, such as the United States, and countries that rely on importing crude oil, such as Japan and South Korea.
According to 658 pages of prospectus the company has recently entered into non-binding agreements regarding the expansion of its downstream business in Asia, including entering into a non-binding letter of intent with Reliance Industries Limited on August 12, 2019 to purchase 20 per cent stake in its oil to chemicals division.
Saudi-Aramco, the world’s largest integrated oil and gas company, is the most profitable company in the world, and its valuation at the upper end of the range of $2 trillion. Saudi Crown Prince Mohammed bin Salman is targeting for the Aramco IPO to be the double that of Microsoft, the most valuable company in the world and seven times that of Exxon Mobile, the most valuable oil company.
The company’s crude oil production accounted for approximately one in every eight barrels of crude oil produced globally from 2016G to 2018G.
Despite the terror attack on its oil facility at Abqaiq in September by the Houthi rebels of Yemen backed by Islamist Iran, the oil giant shows no sign of wearing thin with the incident and shows exemplary courage to leave the past behind, and form a coalesce of partners to boost the economy.
With strong determination, the company intends to continue the strategic integration of its upstream and downstream businesses to facilitate the placement of the Company’s crude oil in larger way through domestic and international refineries.
For example, the proposed acquisition of a 70% equity interest in SABIC supports the significant expansion of the Company’s downstream activities particularly in its chemicals business, and provides additional opportunities for the Company to supply mixed feedstock of crude oil, refinery products and gas to manufacture petrochemicals products.
The prospectus say the company’s net refining capacity as at 31st December 2018 made it the fourth largest integrated refiner in the world based on a comparison with the most recently available third party refining capacity data as provided by the Industry Consultant. As at 31 December 2018, the Company had a gross refining capacity of 4.9 million barrels per day and net refining capacity of 3.1 million barrels per day.
“The Company’s strategy is to continue increasing its in-Kingdom refining capability and expand its strategically integrated downstream business in high-growth economies, such as China, India and Southeast Asia, while maintaining its current participation in material demand centres,” it further says.
During the summit India and the Kingdom signed almost 12 MoUs that include
1) Defence Industries Collaboration.
2) Cooperation on renewable energy.
3) Medical Products Regulation.
4) Prevention of Narcotics trafficking and drug demand reduction.
5) MoU between Saudi ARAMCO and Indian Strategic Petroleum Reserves Ltd.
6) MoU between Foreign Services Institutes.
7) MoU for Atal Innovation Mission.
8) MoU between stock exchanges.
9) MoU on Haj related cooperation.
10) MoU on RuPay card.
11) Agreement on security cooperation Bilateral air services agreement.
12) Agreement between Middle East unit of Indian Oil Corp and Saudi Arabia’s Al Jeri Group for downstream cooperation including retail outlets in Saudi Arabia.
It seems clear now India’s recent move to comply with the US sanctions against Iran by dumping oil import from Tehran served to bring Saudi Arabia and India closer in an unprecedented manner.
The Abqaiq oil facility was hit by using drones in September, the attack carried out by Houthi Islamist rebels of Yemen funded and fully backed by Iran.
The attack was uncontrovertibly condemnable as it was directed towards a facility that is by and large perceived as a global energy resource and serves as a main supply line of the global oil export.
However what is more welcoming is India’s move, to dump oil import from Iran in compliance to sanctions imposed against Tehran by the Trump administration due to Tehran’s unwelcomed interference in the region.
According to a recent statement by a high-level Saudi diplomat, Tehran has used the $150 billion returned to it by the former Obama administration to sponsor extremism, and wreak havoc and chaos in the region by aiding pan-Islamist groups like Hizbollah, and the Houthi rebels.
Iran’s blunder has by default opened wide the vacuum for both India and Saudi Arabia to enter the dawn of a new unprecedented era of energy cooperation.
Iran’s undeniable support for Islamists in the Middle East, who are enemies of virtually every one of India’s allies in the region, including Israel, seems to resonate most with policymakers in Delhi and could be another strategic reason behind Delhi’s dumping Tehran, for Dhahran.
It seems, the recent distancing by India’s GCC allies from past pan-Islamist sympathies, brought them closer to India which itself has suffered a continuous burn with cross-border Islamist terrorism unleashed by Pakistan for several decades against it. In the past, Tehran’s religious, not political, interpretation was typically seen by counter-terrorism experts as antithetical to Sunni extremism. This had made Iran a default religious favorite of several global counter-terrorism experts. However, the recent religious reforms, official statements, and clear stance taken by India’s Arab allies in the GCC, now make it all too clear that the real danger from Islamist extremists stems from their political ideology, and not specifically only any particular interpretation, as the Aramco attacks demonstrate.
Iran’s well known support and rubbing shoulders with pan-Islamist extremists in the region, is by and large destabilizing the region and this, Tehran’s Islamist stance, it seems, is the new major point of concern that has pushed India’s tilt towards complying with US sanctions against Iran, and brought it so much closer to Tehran’s rival – the kingdom.
Ahmed Khan is the Editor-In-Chief & Publisher of The Rahnuma Daily (theRahnuma.com), the online English daily edition of The Rahnuma-E-Deccan Daily (ReDD), India’s oldest Urdu daily print newspaper. Established in 1921, ReDD is ranked by the INA (Indian Newspaper Association) as among the top five most widely circulated Urdu newspapers in India. Ahmed resides in Hyderabad at his maternal ancestral home with his uncle H.E. Mr. Syed Vicaruddin, Editor-In-Chief, Publisher, The Rahnuma-E-Deccan Daily. He can be contacted at, @editor_therahnuma, email@example.com