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India and Saudi Arabia have decided to intensify efforts to accelerate the implementation of the proposed 60-million-tonnes-per-annum (60 mtpa) west coast mega refinery project that has been hanging fire for years. The decision, which entails formation of a joint monitoring committee to track the project’s progress, was taken earlier this week during Saudi Arabia’s Crown Prince and Prime Minister Mohammed bin Salman’s state visit to India.
The ambitious project to build the mega oil refinery and petrochemicals facility in Maharashtra’s Konkan belt with proposed participation from Saudi Arabia and the United Arab Emirates never really took off. Shifting political equations in the state coupled with strong resistance from sections of locals around the proposed sites in the Ratnagiri district nearly thwarted the project, which was first proposed in 2015 as a joint effort by India’s public sector refiners to build one of the largest refining complexes globally.
“Both sides, the Prime Minister (Narendra Modi) as well as the Crown Prince, extended their full support to the early implementation of the west coast refinery project which as you know is a trilateral cooperation between Aramco, ADNOC (Abu Dhabi National Oil Company) and the Indian companies for which funds to the tune of $50 billion are already earmarked,” Ausaf Sayeed, Secretary (Consular, Passport, Visa & Overseas Indian Affairs) in the Ministry of External Affairs, said in a press briefing on Monday.
Saudi Arabian Oil Company, or Saudi Aramco, is the national oil company of Saudi Arabia. In April 2018, Aramco inked a preliminary deal to partner the main project proponents — India’s public sector refiners Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) — to build the refinery.
At the time, the project cost was estimated at Rs 3 lakh crore. In June of that year, ADNOC was also roped in to jointly pursue the project with Aramco and the Indian companies. IOC, BPCL, and HPCL, had already incorporated a joint venture (JV) — Ratnagiri Refinery & Petrochemicals (RRPCL) — to implement the project.
Even as Monday’s announcement is significant as a signal that the project is still a priority for the Centre and the foreign partners, and has reignited hope among the project proponents, it is still unclear if and when the refinery is expected to be up and running. No doubt, it is a statement of intent from India and Saudi Arabia, but for the project to see the light of day, a lot will have to change on the ground.
India is the world’s third-largest consumer of crude oil and one of the few major economies where demand for petroleum fuels, products, and petrochemicals is expected to grow substantially over the coming years and decades, notwithstanding the growth in electric mobility and renewable energy sectors. In fact, the country is already seen as a key driver of global oil demand and, as per various estimates, is set to soon eclipse China to emerge as its largest driver.
No wonder then that India and its refiners, particularly public sector players, have big plans to increase refining and petrochemicals capacity in line with the likely increase in demand. Alongside, India also has ambitions to become a global refining hub and step up petroleum product and petrochemical exports.
As the single biggest proposed greenfield refinery project in the country, the West Coast refinery and petrochemicals project is a marquee element of India’s medium- to long-term refining capacity expansion strategy. The country aims to increase its refining capacity to 450 mtpa from the current 250 mtpa over the next few years.
For Aramco and ADNOC, the project offers an opportunity to make inroads into one of the top and growing markets for petroleum products, offering them prospects of increasing diversification, expanding their global footprint, risk mitigation by investing in downstream petroleum segment given their heavy reliance on the upstream segment, and ensuring offtake of their oil in a major market. India depends on imports to meet over 85 per cent of its crude oil requirement, and Aramco and ADNOC feature among the top oil suppliers to India.
“By investing in this project, we will both secure off-take of our crude to a key market for ADNOC, as well as strengthen access in one of the world’s largest and fastest growing refining and petrochemical markets. It underlines our expanded approach to energy partnerships by joining hands with both Saudi Aramco, and our Indian colleagues, combining a truly unique set of assets, capabilities and market reach to meet India’s projected energy demand growth,” ADNOC Group Chief Executive Officer Sultan Ahmed Al Jaber had said in June of 2018 when ADNOC and Aramco inked the framework agreement to jointly build, own, and operate the West Coast refinery complex with the Indian partners.
As per the framework agreement, Aramco and ADNOC were to take 50 per cent stake in RRPCL, while IOC, BPCL, and HPCL would together own 50 per cent of the company. However, with the project implementation not taking off, the foreign partners have so far not picked up any stake in RRPCL, and IOC continues to own 50 per cent of the joint venture, while BPCL and HPCL have a 25 per cent stake apiece.
Back in 2015, three states — Gujarat, Maharashtra, and Tamil Nadu — were seen as the major contenders for the mega coastal refinery that the new government at the Centre was planning. The Maharashtra government, then under Devendra Fadnavis, managed to bag the project. After much deliberation between the Centre, state, and the three Indian public sector refiners, Nanar in the Konkan region’s Ratnagiri district was chosen for the project. But the plan soon hit a major roadblock as a large number of locals strongly opposed the project and declined to give up their land for it.
Around 15,000 acres of land had to be acquired for the project across 17 villages in the area. The key fear among the locals was that a mega oil refinery could pollute and damage the region, dealing a body blow to cultivation of the famed alphonso mangoes and cashews, along with hitting the local fishing industry.
The opposition had political hues, given that the Konkan region is considered significant in Maharashtra’s politics and the region has traditionally been seen as a bastion of the Shiv Sena. In fact, the scrapping of the Nanar site for the mega refinery project was reportedly one of the preconditions put forth by the then undivided Shiv Sena for an alliance with the Bharatiya Janata Party in the 2019 Lok Sabha polls. The Shiv Sena prevailed and it was then decided that an alternate site for the project would be explored, most likely in the Raigad district.
After the Shiv Sena and the BJP fell out later that year, and Uddhav Thackeray took over as Maharashtra Chief Minister in the Shiv Sena-Congress-Nationalist Congress Party’s Maha Vikas Aghadi (MVA) government, the state recommended Barsu in Ratnagiri district as the new site for the project. There too, a section of the locals are up in arms against the project and are voicing concerns similar to those heard in Nanar.
On the other hand, locals supporting the project argue for it in the name of development and employment opportunities. And in this case also, politics is hard to miss. Interestingly, the out-of-power Thackeray is now opposing the proposed refinery, claiming that while he did suggest Barsu as the project site, the project must not come up against the will of the locals. He also reportedly claimed that he was earlier misled by some people in his government who claimed that the people of Konkan wanted the refinery to be built.
In April this year, protests broke out in the area against the soil testing activity for the project. There were also incidents of clashes between some protestors and the police. The war of words between the Eknath Shinde-Devendra Fadnavis government and the Opposition MVA alliance intensified in the aftermath of the protests. With the Lok Sabha polls just a few months away, the project again seems to be getting caught in political crossfire, which is again casting a shadow on its future.
With a renewed push at the government-to-government level between India and Saudi Arabia, there is renewed optimism among the project’s participants and supporters. Realistically, if the project fails to take off at the proposed site in Ratnagiri, there are only a handful of practical alternatives to salvage it. None is an easy fix and all would be fraught with challenges of their own.
The government and the oil companies could scout for an alternative coastal site within Maharashtra. Over the years, sites in other coastal districts of Maharashtra like Sindhudurg and Raigad were evaluated for the project, but the sites in Ratnagiri were finalised on both occasions. The other option would be to consider another coastal state for the project, preferably along the west coast due to its maritime proximity to West Asia, given the participation of Aramco and ADNOC in the project.
A more drastic alternative would be to split the proposed 60-mtpa refinery into three to four separate refineries of 15-20 mtpa. According to people in the know, such ideas have come up for discussions over the years but so far, the plan to establish one mega refinery has prevailed given the higher scale and efficiency potential of a large single-location refining complex vis-à-vis smaller individual units.
