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The mega refinery complex that India plans with the national oil companies of Saudi Arabia and the United Arab Emirates (UAE) will cost more than the original US$44-billion estimate, Indian Oil Minister Dharmendra Pradhan said on Tuesday, confirming earlier reports that the huge project would likely see costs swell.
“The primary plan was around $45 billion, it will be more than that,” Pradhan said on the sidelines of the World Energy Congress in Abu Dhabi, as carried by Reuters. The minister declined to point to a specific figure.
India, in partnership with the state oil companies of Saudi Arabia and the UAE, plans to build a giant refinery in the state of Maharashtra on India’s west coast. 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.
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, in recent months, the giant project has seen several setbacks, including the need to relocate after the process of land acquisition at the previously selected site was put on hold late last year due to strong opposition from local farmers.
India is considering the reduction of the crude capacity of what would be its largest oil refinery as the country is trying to figure out how to cut swelling costs after strict environmental measures and snags in land acquisition inflated the overall costs to US$60 billion from US$44 billion, The Economic Times reported last month, citing top officials.
India has raised the cost estimate by 36 percent from the initial sum for the project, four sources familiar with the talks between Saudi Arabia and India told Reuters in August.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.