SAUDI ARABIA - India.

Saudi Aramco and Shell concluded a strategic alliance deal in late 1997 for downstream investments in the Indian market. But so far there have been no concrete results. Saudi Aramco in 1998 pulled out of a major oil refining project promoted by Hindustan Petroleum Corp Ltd (HPCL). Saudi Aramco has been negotiating a JV for a new LPG terminal, storage depot and distribution facilities on the Indian west coast.

HPCL has been considering an equity in a Saudi Aramco export refining project in Yanbu', a strategically located zone, and the new plant is to supply the US East Coast with high-quality gasoline, low-sulphur diesel to Europe and naphtha to Asia. The refinery will run on heavier quality crude oil. HPCL held preliminary talks for a stake in the refinery, HPCL Chairman M.B. Lal was quoted as saying on April 5. HPCL has also offered Saudi Aramco a stake in its Vishakhapatnam refinery which will double capacity to 300,000 b/d in three years. Lal visited Saudi Arabia with India's Petroleum Minister Mani Shankar Aiyar in late March.

Saudi Arabia is to remain India's main supplier of crude oil over the next two decades, during which the country's oil imports are expected to double, Minister Aiyar said on May 3. India imports 70% of its crude oil requirements, mostly sour grades from the Middle East, and its dependence on foreign supplies is set to rise in step with its rapidly growing economy. "As India's import of crude oil is likely to double over the next 20 years, imports from Saudi Arabia might also increase commensurately", Aiyar told the Indian parliament, adding: "Saudi Arabia has assured supply of any additional requirement of crude oil to India". Saudi Arabia accounts for 25% of India's total imports of 1.9m b/d.

Saudi Aramco is in talks with the state-owned Indian Oil Corp. (IOC) for a stake in IOC's 180,000 b/d Paradip refinery, which is likely to be built by 2010. One Indian official said of Saudi Aramco: "They are very keen to involve Indian firms in the new refinery and we want to invest in Saudi Arabia to strengthen our relationship. We depend heavily on Saudi crude oil". In January, Saudi Aramco CEO Jum'ah said in New Delhi his company was keen to enter India's refining sector and strengthen ties with its Indian customers. He said Saudi Aramco had wanted to make a bid for a controlling stake in HPCL when the Indian government was planning to sell off its stake in the refining and retailing company two years earlier.

India is one of the fastest growing markets for LPG in the world, with over one million having for years been on the waiting list for LPG in the Mumbai (Bombay) area alone. Saudi Aramco is the biggest producer and exporter of LPG in the world. But this position is about to be taken up by Qatar as Saudi industrial demand for LPG is growing rapidly.