Saudi Arabia to Increase Crude Supplies to India to 40 Million Tons

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Researched by Industrial Info Resources (Sugar Land, Texas)--Saudi Arabia has agreed to increase annual crude supplies to India from the present 25.5 million tons to 40 million tons. The assurance and agreement was given at a meeting between Saudi Arabian representative Ali Bin Ibrahim Al-Naimi and Murali Deora, the Indian Minister for Petroleum and Natural Gas.

The discussion was held in the backdrop of the Indian Prime Minister Dr. Manmohan Singh's three-day state visit to the Saudi Arabia. The visit is expected to strengthen trade ties between the two countries.

India is seeking to double crude imports to meet growing energy demand, even as three new refineries in the country at Paradip in Orissa, Bhatinda in Punjab, and Bina in Madhya Pradesh are in the final stages of completion. India is also exploring the possibility of procuring heavy crude from Saudi Arabia.

India's refining capacity stands at about 3.5 million barrels per day (BBL/d). In the next two years, India plans to increase its refining capacity by 1 million BBL/d. During this period, Saudi Arabia's crude exports to India are likely to grow by 500,000 BBL/d.

Both countries have agreed to work together in the areas of technology, training, and manpower exchange in the oil and gas sector. Indian public sector companies were urged to set up joint ventures in Riyadh. Dr. Singh also indicated that the environment and economic conditions were now suitable for relations between Saudi Arabia and India to go beyond the traditional "buyer-seller" association.

Addressing media and leaders of the Saudi Arabian industry, Dr. Singh urged Saudi Arabia to invest in India's chemicals, health care, manufacturing, energy, construction, agriculture, telecom and other service industries. India has offered a 10% stake in the Paradip refinery, which is being developed by Indian Oil Corporation Limited (BSE:530965) (IOCL) (Mumbai) to Saudi Aramco (Dhahran, Saudi Arabia) for $650 million.

The highlight of Dr. Singh's state visit was the signing of the "Riyadh Declaration" with Saudi Arabia's King Abdullah Bin Abdul Aziz Al Saud, which is expected to usher in a new era of bilateral trade and cooperation between the two nations. The declaration comes four years after the signing of the "Delhi Declaration" during King Abdullah's state visit to India in 2006, which boosted Saudi Arabian exports to India from $500 million in 2006 to nearly $23 billion in 2008. During this period, Saudi Arabia surpassed Iran as India's largest crude supplier. In 2008-09, bilateral trade between India and Saudi Arabia stood at nearly $25 billion.

Several agreements were signed during the Indian premier's state visit to Saudi Arabia. Tata Motors Limited (BSE:500570) (Mumbai) signed an $80 million agreement to supply buses. The Center for Development of Advanced Computing (C-DAC) (Pune, Maharashtra) and the Indian Space Research Organisation (ISRO) (Bangalore, Karnataka) also signed separate agreements with King Abdul Aziz University for Science and Technology (Jeddah, Saudi Arabia) to work together in the areas of science and research. Recently, RITES India Limited (New Delhi) signed a contract to participate in the 2,200-kilometer North-South railway project in Saudi Arabia.

This fiscal year, India is poised for 7% growth and is optimistic of growing 9% in the next two years. India and Saudi Arabia share decades of cordial bilateral trade relations. Indian exports to Saudi Arabia include plastic, machinery, fabrics, yarn, rice, iron and steel, and chemicals.

According to the Federation of Indian Chambers of Commerce and Industry (FICCI) (New Delhi), India is Saudi Arabia's fourth-largest trading partner. Saudi Arabia is the 15th biggest market for India, accounting for nearly 1.76% of India's exports. Saudi Arabia, which is the source for about 5.5% of Indian imports, also employs about 1.4 million Indians.

The Gulf nation is also a popular destination for Indian companies to set up subsidiaries and joint ventures. According to the Saudi Arabia General Investment Authority (SAGIA) (Riyadh, Saudi Arabia), about 82 new licenses have been approved in the last two years, with investments amounting to nearly $467.18 million, allowing Indian companies to establish subsidiaries or joint ventures in the country.

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