In a bid to expand its footprint in the growing Indian oil sector, the world’s biggest oil company, Saudi Aramco, has expressed interest to capture a significant portion of the USD 300-billion investment opportunity announced by the government in the oil and gas sector in India in the next 10 years. The company is also keen on acquiring a stake in India’s biggest upcoming oil refinery on the western coast in Ratnagiri, Maharashtra.
The announcement comes after the much talked-about Essar-Rosneft deal and highlights the attractiveness of the Indian oil market. It also reinforces the changing oil marketing landscape and chances of upcoming intense competition. Aramco’s head Amin H Nasser said that the company is looking to invest in refining, petrochemicals and fuel retailing including lubricants.
The company is eyeing a stake in the recently set-up 60-million tonne west coast refinery jointly owned by IOCL, BPCL and HPCL (50:25:25 respectively). Aramco is also looking to enter a joint venture (JV) to access the retail fuel markets across the country.
Aramco is a state-owned oil and natural gas company of Saudi Arabia and has the world’s second largest oil reserves and oil refining capacity. The company has been rapidly expanding globally and has entered into several JVs across the world.
Aramco is planning to come up with an approximately USD 100 billion IPO in 2018 which represent a mere 5 percent of the entire company. Recently, the firm had created an Asian arm under the name Aramco Asia and set up an office in Gurugram to sell crude oil in Asia.
The Indian government is planning to roll out the new energy policy in the next 30-45 days, which is expected to bring in significant reforms in the sector. After Rosneft and BP, Aramco would be the third big entry in the Indian oil markets.
International players with deep pockets, better fuel sourcing capabilities and integrated operations have the capability to bring in greater economies of scale in oil production and distribution. The JVs with international players are, therefore, expected to generate better margins and thereby more cushion to play on pricing in the highly price sensitive
Indian Oil Retail Market
Intensifying competition and increased entry of international players is expected to pose serious competition to state-run companies. International players have heavy investment plans and are looking for aggressive expansion. The state-run players will have to up their game to maintain their dominant position in the long term.