Why PM Modi is reaching Out to Oil-Rich Nations to Invest in the Hydrocarbon Sector While on the one hand the demand for hydrocarbons is galloping, the domestic production has remained muted

Prime Minister Narendra Modi on his recent visit to Saudi Arabia announced that the Kingdom will invest in India's downstream oil and gas projects which will be a key association between the two nations, a move that would also provide the world's top oil exporter a steady outlet for its produce.

Saudi Aramco along with UAE's national oil firm ADNOC has already announced to take up 50 per cent stake in the planned 1.2-million barrels per day mega refinery on India's west coast.

Earlier, India also engaged with Russia to forge energy ties.

These are efforts by the government to take care of its hydrocarbon requirements as while on the one hand the demand is galloping, the domestic production has remained muted.

Shortfall & Future Plan

According to the Petroleum Planning and Analysis Cell, India's crude oil production has been declining since the past five years. Meanwhile, the country's import dependence for crude oil has been going up.

In 2018-19, India produced around 32.5 million tonne (MT) of crude oil which was lower than 34.0 MT in 2017-18.

India's import dependence has been increasing since 2014-15, despite Modi's intention to reduce as was articulated by him after coming to power in 2014. Given that consumption in the country is rising every year, the government is now eyeing foreign investment in the energy sector including exploration and production.

The Indian government is trying to exit the oil business, petroleum minister Dharmendra Pradhan told media on Thursday.

The government is trying to sell its 53.29% stake in state-run refiner Bharat Petroleum Corporation. It has already sold its stake in Hindustan Petroleum Corporation to ONGC.

Aramco is additionally looking at a 20% stake in the petrochemical and refining business of Reliance Industries through a multibillion-dollar deal.

Further Engagements

Prime Minister Narendra Modi also visited Riyadh to attend an investors' summit and met King Salman bin Abdulaziz Al Saud and Crown Prince Mohammed bin Salman.

During his visit, Modi addressed a session, Future Investment Initiative 2019, where he invited local companies to invest in India's energy sphere. Stating the investment target, Modi mentioned that India expects $100 billion pouring into the country's oil and gas sector by 2024.

Modi interacted with the King Salman bin Abdulaziz and Crown Prince Mohammad bin Salman to discuss trade and to strengthen bilateral relations between the nations.

Also Read: What PM Modi's Saudi Arabia Visit Holds for Indo-Saudi Business in India

According to a statement released by the Prime Minister's Office, Modi said in an interview to Arab News that, "From a purely buyer-seller relationship, we are now moving towards a closer strategic partnership that will include Saudi investments in downstream oil and gas projects."