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Sunday , November 18 2018

Aramco and ADNOC in joint venture in India – Is there any synergy?

Kamel Al-Harami

Independent Oil Analyst In April this year, Saudi Aramco bought 50 percent shares of a new yet-to-be-built refinery and petrochemical complex in Ratnagiri, west coast of India with Indian Oil Company (IOC) at a cost of $44 billion.

The acquisition is part of Saudi’s expansion plans for investing in growing oil c o n s u m e r markets such as India, China, Korea, and other such growing markets in the world. It is based on an established policy and strategy to secure markets for more than 10 million barrels per day.

In the meantime, India is seeking to increase its refining capacity to nine million barrels by the end of 2030. Therefore, both parties have a common interest in forming the venture. It is a win-win situation. Aramco’s expansion plans and acquisition are an ongoing operation applicable in any oil consuming area in order to secure and solidify its position in the energy market for years to come.

Last week, Abu Dhabi National Oil Company (ADNOC) announced its joint deal with Saudi Aramco for buying 50 percent of Aramco’s shares in the new Indian refining and petrochemical complex with the aim of forming a three-party joint venture operation.

The question that pops up in the mind is — Is there any common ground, objectives or goals that can tie the two Gulf national oil companies together? In simple terms, is there any synergy, or benefits that can be shared together? We have to consider the size of Aramco, which is the biggest oil exporting country with oil production of over ten million, ten domestic refineries, and many JV operations almost in every country as well as its vast experience and knowhow that does not seem to fit ADNOC. What added value can be obtained from Abu Dhabi national oil company to be part of this venture? Where is the strategic fit? Saudi Aramco does not need the cash to buy into this new project, as it has its own resources, and sells crude oil to Indian oil companies as partners.

Saudi is the biggest oil supplier with more than one million barrels per day, and it is pushing to maintain its number one position. It is investing in the new refinery just to meet its objective nicely. On the other hand, Abu Dhabi is in fifth place and it will be hard for it to gain extra volume at expense of Saudi. In fact they are in competition. So this is why the question rises about where the strategic fit is and if there is any real synergy that is missing or unclear in this Indian three-party joint venture. Perhaps there are some hidden objectives that are not clear to us. However, under the current circumstances, none seems to exist to clarify the hidden benefits and advantages.

email: naftikuwaiti@yahoo.com

By Kamel Al-Harami

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