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Mon 30 Sep 2019 04:32 PM

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Saudi Arabia mulls $100bn investment in India's petrochem sector

Saudi Ambassador in India also reiterates Saudi Aramco's interest in investing in the $44 billion West Coast refinery project in Maharashtra

Saudi Arabia mulls $100bn investment in India's petrochem sector
Saudi Arabia’s Ambassador to India, Dr Saud bin Mohammed Al Sati

Saudi Arabia is looking at investing $100 billion in India in sectors such as petrochemicals, infrastructure and mining, considering the country’s growth potential, a top diplomat of the Kingdom has said.

Saudi Arabia’s Ambassador to India, Dr Saud bin Mohammed Al Sati said India was an attractive investment destination for Saudi Arabia and it was eyeing long-term partnerships with New Delhi in key sectors such as oil, gas and mining.

“Saudi Arabia is looking at making investments in India potentially worth $100 billion in the areas of energy, refining, petrochemicals, infrastructure, agriculture, minerals and mining,” Al Sati told Indian wire service PTI.

Policy analysts in India said the Saudi Ambassador’s comments on the huge investment plans in India will be a morale booster for Indian government, at a time when India is facing a slump in its economy.

Tax cuts

India recently announced major cut in corporate tax in a bid to bolster private investments to perk up the economy.

While corporate tax was cut to 22 percent from the prevailing 30 percent for existing companies, the tax has been lowered to 15 percent for new units in the manufacturing sector which will be set up after October 1 this year.

Al Sati said Saudi Aramco’s proposed partnership with Reliance Industries Ltd reflected the strategic nature of the growing energy ties between the two countries.

The Saudi envoy also reiterated Saudi Aramco’s investment plans in the $44 billion West Coast refinery-cum-petrochemical project in the western Indian state of Maharashtra.

Al Sati said investing in India’s value chain from oil supply, marketing, refining to petrochemicals and lubricants is a key part of Aramco’s global downstream strategy.

“In this backdrop, Saudi Aramco’s proposed investments in India’s energy sector such as the $44 billion West Coast refinery and petrochemical project in Maharashtra and long-term partnership with Reliance represent strategic milestones in our bilateral relationship,” he said.

Greenfield refinery project

The Saudi envoy’s comments comes amid speculations in the oil industry circles in India whether the Saudi energy giant will go ahead with its proposed investment plans in the greenfield refinery project in Maharashtra, after its in-principle agreement with the Reliance group for acquiring 20 percent stake in the latter’s refinery and petrochemicals business division.

Saudi Aramco, along with Abu Dhabi National Oil Company (ADNOC), is to hold 50 percent stake in the West Coast refinery project, while the remaining 50 percent stake will be held by a consortium of the 3 state-owned Indian oil refinery and marketing companies – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.

The project construction is yet to take off due to land acquisition related issues, leading to a significant cost escalation from the initial estimate of $44 billion. The cost escalation is said to be about 36 percent.

Saudi Arabia is a key pillar of India’s energy security, being a source of 17 per cent or more of crude oil and 32 per cent of LPG requirements of India.