Indian Oil Corporation Ltd (IOC) said it is in initial talks with Saudi Aramco on downstream investments, including a mega project on its west coast that could help the Organization of the Petroleum Exporting Countries member lock-in customers amid an oil supply glut. Oil producers are targeting growing demand in Asia to boost market share after rising US shale oil output has displaced some of their supplies.
India, the world’s third biggest oil consumer, plans to build 1.2 million barrels per day (bpd) refinery to petrochemical project in the country’s west coast to feed its growing fuel demand.
The International Energy Agency estimates India’s refining capacity, the fourth biggest in the world, would lag local fuel demand going forward, requiring investment in more plants.
“They are interested in projects and we have just started (talks)...It’s very, very preliminary discussions,” B. Ashok, chairman of IOC, told reporters when asked if his firm is in talks with Aramco on the west coast project. Saudi Arabia’s Energy Minister Khalid al-Falih earlier said that Aramco continues to explore a variety of promising collaboration opportunities across the ASEAN region and elsewhere in Asia, with India being a prime target.
Saudi Aramco is beefing up its overseas portfolio by investing in refineries in major markets to secure an outlet for its crude oil ahead of its initial public offering next year.
IOC plans to invest about $30 billion in five years with the bulk of that meant for fuel upgradation projects and petrochemicals, Ashok told reporters on the sidelines of the Asian Oil and Gas conference.
India plans a nation-wide use of Euro VI compliant fuels from April 2020. IOC and its partners are expected to make a final investment decision on the west coast project in end-2018 to early 2019. The project, which includes a 3 million tonne/year ethylene unit, would then take five years to complete, he said. IOC aims to complete a 5 million tonne a year liquefied natural gas terminal at Ennore in the east coast in the third quarter of 2018, Ashok said.
Indian refiners are raising the share of spot crude in their overall crude intake to benefit from changing market dynamics and quickly capture cheap distress and arbitrage barrels.
Ashok said this year IOC will buy 68 per cent of its oil needs from term suppliers, down from 80 per cent earlier.