Rosneft, the Russian oil company, has shown keen interest in constructing a brand-new refinery in India through a collaboration with domestic state-owned refiners, according to insiders. In an effort to pursue an alternative plan to the long-delayed $44-billion west coast refinery, India's public sector refiners have been actively seeking foreign partners.
Sources reveal that Rosneft has engaged in preliminary discussions with Indian government officials and executives from state-run refiners regarding a potential project in India. This endeavor would be separate from the existing Gujarat refinery operated by Rosneft-backed Nayara Energy.
In an email statement to ET, Rosneft expressed its commitment to expanding cooperation with Indian partners, stating, "Cooperation with Indian companies is being developed in the integral format throughout the whole technological chain, from production to refining and sales of petroleum products." They also hinted at upcoming announcements regarding specific plans.
Despite attempts to gather more information, ET's queries to the oil ministry, as well as Indian Oil Corp, Hindustan Petroleum Corp Ltd (HPCL), and Bharat Petroleum Corp Ltd (BPCL), went unanswered.
Although it remains uncertain which Indian refiner will eventually join forces with Rosneft, Indian Oil and BPCL are considered strong candidates. HPCL, burdened by the construction of a greenfield refinery in Rajasthan, is facing overleveraging. On the other hand, Indian Oil is optimistic about capacity expansion and already has a crude purchase agreement with Rosneft. Meanwhile, BPCL possesses a suitable land parcel in Uttar Pradesh for a potential refinery.
Insiders familiar with the matter explain that state refiners have come to realize the necessity of pursuing an alternative to the west coast project, which involved Saudi Aramco taking a 50% stake in 2018. The joint project, which includes Indian Oil, BPCL, and HPCL, faces challenges such as land unavailability and political conflicts in Maharashtra, causing distraction and jeopardizing the project's prospects.
Recognizing the need to augment India's greenfield capacity to meet future fuel demands, the government and state refiners are now inclined to explore separate evaluations of greenfield capacity in collaboration with foreign players, instead of relying solely on the west coast project. Consequently, they are likely to approach more overseas entities for potential partnership discussions.
To maintain control over crude sourcing strategy and product pricing in the domestic market, state refiners intend to retain the majority stake in any joint venture with foreign firms, according to individuals familiar with the companies' plans. This approach will enable them to strategically navigate the market and secure their positions effectively.
