New Delhi: The world’s biggest oil producer, Saudi Arabian Oil Co., or Saudi Aramco, will partner with a consortium of Indian state-run companies to set up the largest global refinery and petrochemical complex at Ratnagiri in Maharashtra at an investment of $44 billion.

Saudi Aramco will also enter fuel retailing in India, where energy demand is expected to grow at 4.2% over the next 25 years.

The equal joint venture between the Indian firms and Saudi Aramco will process 1.2 million barrels of crude oil per day and 18 mtpa of petrochemical products. The Indian consortium comprises of Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd (HPCL) and Bharat Petroleum Corp. Ltd (BPCL) and will hold a 50% equity stake in the joint venture. Of this, the Indian Oil’s share will be half, with the rest equally shared by HPCL and BPCL.

The kingdom is fully committed to provide for the principles of energy access, sustainability and security as articulated by India, said Saudi Arabia’s energy minister Khalid Al-Falih at the signing of a memorandum of understanding for the 60 million tonnes per annum (mtpa) Ratnagiri Refinery & Petrochemcials Ltd (RRPCL).

Apart from investing in the project, Saudi Aramco will also supply crude oil to the project, ensuring supply security. This assumes significance given India’s energy needs are primarily met through imports, with the country importing 214 million tonnes of crude oil in 2016-17. In future, Saudi Aramco may also induct a strategic partner by divesting its 50% equity stake in the project.

Assurance and (energy) security will only increase with this investment, added Khalid Al-Falih who is in India to attend the 16th International Energy Forum Ministerial (IEF—16) inaugurated by Prime Minister Narendra Modi on Wednesday.

Saudi Aramco’s India play has been in the works for some time now and follows Modi’s visit to the Gulf kingdom in 2016. It marks a reset in the changing global energy architecture, with buyers at the centre of oil majors’ future growth plans. India is the world’s third-largest energy consumer after the US and China.

“We see India as a priority destination for our investments," said Khalid Al-Falih.

The Indian government is seeking Saudi Arabia’s participation in grassroots refinery projects coming up in the country, Mint had reported on 3 May 2007.

India’s petroleum minister Dharmendra Pradhan said the relationship between India and Saudi Arabia has progressed from the level of a buyer and seller to that of a “strategic partnership".

The development also assumes significance in the backdrop of a supply cut by the Organization of the Petroleum Exporting Countries (Opec)—of which Saudi Arabia is a prominent member—and Russia triggering a rally in global crude oil price. This has resulted in the cost of Indian basket of crude, which averaged $47.56 a barrel in 2016-17, touching $63.80 (average price) in March 2018, according to information from Petroleum Planning and Analysis Cell. Extreme volatility has marked crude oil prices, which had touched a record $147 per barrel in July 2009.

The Indian basket represents the average of Oman, Dubai and Brent crude.

“The strategic partnership brings together crude supply, resources, technologies, experience and expertise of these multiple oil companies with an established commercial presence around the world," the Indian government said in a statement.