Saudi Aramco continues to explore India investment plan

World’s largest oil company Aramco remains committed on its investment plan in India, including a $15 billion deal with Reliance Industries, even though Covid-19 pandemic has made life difficult for oil companies with suppressed demand and falling oil prices and wide scale erosion in valuations.

Replying to a query from IANS, Aramco said that it remains interested in all its Indian investment plan and will give appropriate updates soon. This would include proposed $15 billion investment in RIL’s refinery and chemicals business.

Doubts were raised about investment plan of Saudi Aramco after the oil giant reported a 50 per cent fall in net income for the first half of its financial year, reflecting a devastating year for oil markets and the global economy at large as the world continues to battle the coronavirus pandemic.

“Aramco continues to explore potential growth opportunities in Asia including India,” the company said in an e-mail reply. “We are still engaging in discussions with Reliance Industries and will make appropriate updates as and when necessary,” it added.

Apart from the Reliance deal, Saudi Aramco has expressed its desire to participate in several other ventures in India, the worlds third biggest oil consumer.

There have been government-to-government discussions for Aramco to pick up entire government’s stake in state-run refiner Bharat Petroleum Corporation Ltd. This would give the Saudi entity presence in vast Indian retail market with huge potential for growth.

Indian government is also looking at Aramco’s investment in $60 billion oil refinery proposed in Maharashtra as well get its investment oil marketing and retailing in the country. The oil giant is also exploring options to put some of its oil in India’s strategic oil reserve.

Despite the concerns for the oil market, analysts have said Aramco was better prepared to weather market volatility, owing to its size and scale, its low cost of production and solid free cash flow generation in a weak oil price environment. This is good news for its investment plan for Asia.

India’s Ministry of Petroleum and Natural Gas recently notified liberalised guidelines for bulk and retail marketing of petrol and diesel, offering new opportunities for foreign oil companies, including those in the Gulf, to enter this lucrative energy business.

India is one of the biggest markets in the world for petrol and diesel with retail and bulk domestic sales growing by approximately eight per cent a year.

Leading global energy companies, including Saudi Aramco, Total of France and Trafigura, headquartered in Singapore, have been urging the Indian government to allow them to enter the retail segment of fuel marketing.

“The simplified guidelines aim at increasing private sector participation, including foreign players, in the marketing of motor spirit (petrol) and high speed diesel. An entity desirous of seeking authorisation for either retail or bulk must have a minimum net worth of rupees 2.5 billion at the time of making the application and rupees 5 billion in case of authorisation for both retail and bulk,” the notification said.

To get approval for retail marketing, a company must undertake to set up at least 100 sales outlets across India. “The policy has opened up the marketing sector of petroleum products by removing the strict conditions applicable earlier,” the Ministry claimed.

“The new policy has the potential to revolutionise marketing of transport fuels in the country. It will also encourage dispensing of alternate fuels and augmentation of retail network in remote areas and ensure higher levels of customer service,” the notification said.

Until now, oil firms seeking to enter fuel retailing business had to have specified investments in refining, pipelines, oil exploration and production or terminals in India. Only Indian state-run oil companies had such investments, restricting fuel marketing business to these companies.

 ICICI Lombard:  In a share swap deal, non-life insurer ICICI Lombard General Insurance Company will acquire the business of Bharti AXA General Insurance Company Ltd.

In a regulatory filing late on Friday, ICICI Lombard said the boards of the two companies —ICICI Lombard and Bharti AXA General — had met on Friday and approved entering into definitive agreements for demerger of Bharti AXA’s non-life insurance business into ICICI Lombard through a Scheme of Arrangement. According to ICICI Lombard, the shareholders of Bharti AXA General will receive two shares of ICICI Lombard for every 115 shares of Bharti AXA General held by them as on the date on which the Scheme of Arrangement is approved by the Board of Directors of the two companies.

Indo-Asian News Service