Last week, Adnoc signed on to buy a stake in the US$44 billion project, brought in as a strategic partner by Aramco. Together, the two Middle Eastern titans will hold an equal majority stake of 50% in the project, with IndianOil at 25% and BPCL and HPCL at 12.5% each. That's an unusual move, considering that this is a state project, and some have questioned given the foreign firms such a high stake. But as much as Saudi Aramco and Adnoc need to secure outlets for their crude in an increasingly competitive world, India needs crude far more. And with the latest US moves possibly curbing India's sourcing from Iran, the project has to fall back on the country's stalwart providers.
And Ratnagiri will need a lot of crude. When completed – the new target date is a still-optimistic 2025 – it will equal or best the capacity of Jamnagar (also in India), the current largest refinery in the world. The planned capacity is for 1.2 million barrels per day of crude processing while petrochemical capacity is said to be in the 18 million tons per annum region. Currently, India has a refining capacity of about 232 mmtpa, with domestic demand reaching 194.2 mmtpa in fiscal 2017. According to the International Energy Agency, this demand is expected to reach 458 mmtpa by 2040. The country is also now the world's third-biggest oil importer. More than financial certainty and domestic demand, Aramco and Adnoc's participation guarantees that Ratnagiri will always have enough crude to run. And it fulfils Aramco and Adnoc's ambitions to move further down the value chain into downstream, with Aramco fulfilling its target of having stakes in key refineries in Asia (India, China, Southeast Asia through Malaysia) and the Americas (Port Arthur). Adnoc, too, has invested in India before – having bought a stake in the country's strategic petroleum reserve in Mangalore.
With financing and partners in place, it would seem as if Ratnagiri is a done deal. But there is one major stumbling block – land. The state government of Maharashtra has yet to secure the 15,000 acres required for the refinery, facing stiff opposition from local farmers and laws that state that at least 70% of land owners must give consent for land acquisition. With general elections due in India next spring and opposition parties seizing on the issue, it is likely that no on-the-ground moves will be made until the next government is in place. The National Democratic Alliance (NDA) led by Narendra Modi is expected to win, but will be treading cautiously around this contentious issue. The 2025 target seems ambitious, and by the time it starts operations, India's oil demand may have grown even more.
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