BackOpinion | Modi’s Saudi bargain
Indian market for oil is not just large, it’s among the world’s fastest growing. Aramco, which has an IPO lined up, would be only too pleased to sell India as much oil as it can
PremiumAs Prime Minister Narendra Modi tours Saudi Arabia to deepen ties with the oil-rich nation, all eyes are on the agreements reached between New Delhi and Riyadh. Attracting Saudi investment to facilitate infrastructure development and ensuring energy security will be among Modi’s top long-term priorities.
In the near-term, though, filling up of India’s strategic crude oil reserves seem to be on his mind.
On Tuesday, Modi made a statement to that effect. He said India was looking forward to Saudi Aramco’s participation in our effort to build strategic oil reserves. India has strategic storage facilities in Visakhapatnam, Mangalore and Padur, with underground caverns that can hold 5.33 million metric tonnes of crude oil. The government has already contracted some domestic and overseas oil companies to fill the first two. For the one in Padur, it would be hoping to strike a deal with Aramco.
Once in place, these reserves will enhance India’s ability to keep local prices stable even in the face of a global oil price spike. The recent attack on Aramco’s oil facilities, for example, had sent prices soaring before they settled down.
For Aramco, such an arrangement would mean a confirmed customer for some of its output. If the reserves are used for routine purposes of supply, as is likely, then they would need to be topped up frequently. The Indian market for oil is not just large, it’s among the world’s fastest growing. Aramco, which has an initial public offering lined up, would be only too pleased to sell India as much oil as it can. All in all, if a deal is struck, it would be a win-win for both.
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