India has expressed its interest in inviting Saudi Arabia’s state-owned oil company Aramco to participate in its planned 6.5 million metric tons (MMT) strategic petroleum reserve (SPR) program. The move is aimed at enhancing the bilateral relations between the two countries and securing India’s energy security.
India, the world’s third-largest oil importer and consumer, imports over 80% of its oil needs and relies heavily on Saudi Arabia as one of its main suppliers. India has built strategic storage at three locations in southern India to store over 5 million tons of oil to protect against supply disruptions.
Aramco’s participation in the SPR program
The talks between India and Saudi Arabia on Aramco’s involvement in the SPR program have been going on for years, but gained momentum after the meeting between Crown Prince Mohammed Bin Salman and Prime Minister Narendra Modi last month.
According to an internal document seen by Reuters, the Indian government said that “Saudi Arabia’s Aramco can be invited to participate in the Phase II” of the SPR program, which involves the construction of two new commercial-cum-strategic petroleum reserves of 6.5 MMT.
Aramco declined to comment on the matter, while the Saudi government did not respond to emails seeking comment. The Indian government also did not respond to requests for comment.
Benefits and challenges of the deal
If Aramco agrees to join the SPR program, it would be a win-win situation for both India and Saudi Arabia. India would benefit from having a reliable and stable source of oil in case of emergencies, while Saudi Arabia would gain access to a large and growing market for its crude.
However, there are also some challenges and uncertainties involved in the deal. For one thing, Aramco’s participation would depend on the terms and conditions of the agreement, such as the price, quantity, and duration of the oil supply. For another, Aramco’s involvement would require approval from both governments, which could take time and face political hurdles.
Other areas of cooperation between India and Saudi Arabia
The SPR program is not the only area where India and Saudi Arabia are looking to cooperate. During the visit by the crown prince to India, Saudi Arabia announced plans for an investment facilitation office in India’s Gujarat International Finance Tec-City, a tax-neutral financial service center.
India is also scouting for land to build a 1.2 million metric tonnes per year refinery and petrochemical project in western India with participation of Saudi Aramco and Abu Dhabi National Oil Co (ADNOC). The two governments will form a task force to remove obstacles such as land acquisition, which has delayed the project, which was conceived in 2018. Saudi Arabia has committed $50 billion investment for the project.