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$44B Indian-Saudi-UAE Oil Refinery Hinges On India’s Elections

The fate of a proposed mega refinery and petrochemical complex in India worth US$44 billion and involving the national oil companies of Saudi Arabia and the UAE could depend on the outcome of India’s general elections this spring and whether the party of incumbent Prime Minister Narendra Modi could win a second term in office.

In June last year, Saudi Aramco and the Abu Dhabi National Oil Company (ADNOC) signed a framework agreement and a memorandum of understanding with a consortium of Indian national oil companies to join the mega project at Ratnagiri in the Maharashtra state on India’s west coast. Saudi Aramco and ADNOC will jointly own 50 percent of the new joint venture company RRPCL, while the other 50 percent will be held by the Indian consortium. The parties agreed to explore a strategic partnership and co-investment in the development of the US$44 billion mega refinery.  

By investing in the giant Indian refinery, the national oil companies of leading OPEC producers Saudi Arabia and the UAE would secure off-take for their crude in a strategic fast-growing oil market in Asia. 

However, the process of land acquisition for the new giant complex was put on hold late last year due to strong opposition from local farmers, many of whom depend on their land for their income and livelihoods.

On Monday, the chief minister of Maharashtra state, Devendra Fadnavis, announced that the planned refinery would be relocated to another site, without specifying it.

Related: U.S.-China Trade Deal Could Boost Gasoline Prices

Fadnavis, a member of Prime Minister Modi’s Bharatiya Janata Party (BJP), made the announcement after sealing an alliance for the general election with regional party Shiv Sena, which has opposed the proposed refinery.

The completion of the refinery carries a lot of political risk, and it would also depend on who wins the next election or who makes it in a coalition government, Sri Paravaikkarasu, an analyst at industry consultant FGE in Singapore, told Bloomberg.

According to Ratnagiri Refinery & Petrochemicals Ltd (RPPL), the joint venture company responsible for the huge 1.2 million bpd complex construction and development, the refinery is expected to be commissioned by the year 2025.

According to FGE, the first phase could be ready in 2027-2028, and even this could be an optimistic timeline, considering the recent developments, Paravaikkarasu told Bloomberg.   

By Tsvetana Paraskova for Oilprice.com

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