India and Saudi Arabia Discussed Enhancing Cooperation in Oil Sector

India and Saudi Arabia discussed the World Oil Outlook in New Delhi on 23 February 2012, especially the growing demand for hydrocarbons in Asia and India during the delegation level talks between visiting Assistant Minister for Petroleum Affairs, Saudi Arabia, Abdul Aziz Bin Salman Bin Abdulaziz and RPN Singh, Minister of State for Petroleum and Natural Gas.  The talks were held under the India-Saudi Arabia Energy Consultations. R.P.N. Singh conveyed India’s requirement of incremental quantities of Saudi Arabian oil imports in the years ahead considering the ongoing expansion in India’s refining capacity. The Indian side also conveyed its growing requirement of LPG (Butane and Propane) considering the accelerated expansion of LPG coverage in the country’s rural areas under the Rajiv Gandhi Gramin LPG Vitran Yojana (RGGLVY). India imports nearly 2 million tonnes of LPG from Saudi Arabia. Other related issues such as the imposition of arbitrary cuts imposed by Saudi ARAMCO on supply of Butane and Propane from time to time, MRPL’s request for supply of crude oil on the basis of parent company guarantee instead of letter of credit, etc. were taken up with the Saudi side.

India invited Saudi participation in upcoming investment opportunities in its petroleum upstream and downstream sector including OPaL’s Petrochemical project at Dahej and OMPL’s Petrochemical project at Mangalore. An offer was made to the Saudi side for considering equity participation in these projects as a strategic investor. Other proposed investment opportunities such as IOC’s LNG project at Ennore, BPCL’s LNG terminal at Kochi, HPCL’s grass-root refinery in Vizag and IOC’s petrochemical plant at Paradip were also discussed.

Since both Saudi Arabia and India are prominent actors in the International Energy Forum (IEF) comprising 88 countries, which is the world’s principal vehicle for the ongoing global energy dialogue, several issues related to the IEF were also discussed.

Acknowledging India’s importance as one of the fastest growing markets in the world, Saudi Arabia expressed its readiness to engage India and fulfill its energy requirements on a long-term basis. The Saudi side assured affirmative consideration of India’s request for larger quantities of crude oil and LPG while also agreeing to look into the issues raised by India relating to the hydrocarbon trade and investment between the two countries.

The discussions between Saudi Arabia, a leading producer of crude oil and India, the world’s 4th largest oil importer are significant as they come at a time of heightened uncertainty in the international oil markets. Saudi Arabia supplied 27 million metric tonnes of crude oil to India during 2010-11, making it India’s largest crude oil supplier.