Last month, Saudi Arabia and India agreed to boost energy cooperation, including by potential Saudi investment in two refineries in the world’s third-largest crude oil importer. However, initial talks have already hit a snag as the world’s top crude exporter, Saudi Arabia, is at odds with India over the pricing and volumes of crude it will supply for the refineries, sources with knowledge of the matter told Bloomberg on Monday.
At the end of April, Saudi Arabia and India agreed to enhance cooperation in the energy sector, including in crude oil and petroleum products supply and the construction of two refineries. A High-Level Task Force also agreed to “collaborate on establishing two refineries,” according to a joint statement.
State-owned Indian refiners plan to build several new crude processing plants to meet soaring fuel and petrochemicals demand.
Saudi Arabia, for its part, looks to lock in future term sales for its crude in the top Asian markets, which are set to continue driving global demand growth in the coming years. India has even surpassed China as the single biggest driver of demand growth.
But the Saudi foray into India’s refining sector has stalled before it began. That’s because the Saudis and India are a world apart in their initial negotiating positions.
Saudi Arabia wants to supply half of the necessary crude for the two future refineries, and do so at its official selling price (OSP), the anonymous sources told Bloomberg.
India, for its part, is always on the lookout for the cheapest possible supply and is careful not to put all its eggs in one basket of crude suppliers.
So India insists, per Bloomberg’s sources, to have about 20% of crude supply from Saudi Arabia for the new refining ventures, and to receive said supply at discounts to the OSPs that Saudis set each month against the Oman/Dubai benchmark.
By Charles Kennedy for Oilprice.com
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