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Press Release [FREE Access]
Petro Intelligence » Shift Threat Quells Protest Against Aramco’s Giant Refinery

By R. Sasankan

The Second Coming of the Narendra Modi-led government is expected to revive a near moribund project that the NDA-I regime had set its heart on completing: the 60 million tonne per annum giant refinery in the state of Maharashtra that has been tied up in knots, ostensibly because of land acquisition problems.

The project – conceived by public sector behemoth Indian Oil Corporation – ran into trouble when the local population in Ratnagiri district of Maharashtra refused to give up their land for the refinery. The area, which is close to the coast, falls within an ecologically sensitive zone. The agitation against the refinery was apparently genuine and had not been whipped up by so-called “outsiders” out to scuttle the project. That is when the Maharashtra state government suggested that the project could be shifted to the neighbouring Raigad district.

But even that didn’t seem to help and the project remained in controversy over land acquisition. The stir had taken on political overtones. Several political parties including the Shiv Sena, a junior partner in the ruling coalition in Maharashtra, supported the agitators. Reports suggested several vested interests were tacitly backing the movement. That is when the Modi government started to identify who these players were and then threatened to shift the refinery to the neighbouring state of Gujarat.

The threat appears to have worked. Maharashtra Chief Minister Devendra Phadnavis announced in the legislative Assembly earlier last week that the state-run City and Industrial Development Corporation (CIDCO) would acquire land from 40 villages for the refinery in Raigad district. The new site will be about 100 kms south of Mumbai.

It is interesting to note that when the state-owned consortium formed by Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd had floated the idea of establishing the refinery on the west coast of Maharashtra two years ago, there had been no word of protest. The situation changed dramatically after Saudi Aramco decided to pick up 50 per cent stake in the refinery project.

Aramco’s decision to pick up a stake in the venture came out of the blue and there had never been any inkling that it was planning a major investment in the Indian refinery sector. All along, it had been content to pick up small stake in one of the existing refineries.

The Modi government has been cultivating Saudi Arabia and UAE as a part of its diplomatic strategy that coincided with India’s emergence as the world’s third largest crude oil importer to fuel the growth ambitions of a fast-growing economy. The innovative new leadership of Saudi Arabia was quick to realise the importance of a growing Indian market vis-à-vis the stagnating western economies. Electric vehicles present a formidable threat to the fortunes of global oil producers and these will become a reality in many advanced countries. India will remain unaffected at least for the next 20 years despite the government’s plans to provide a major fillip to electric vehicles.

The mega refinery was a prestige project for Indian Oil Corporation (IOC). Though the largest in the country’s downstream petroleum sector, IOC does not have a refinery on the west coast. It wanted to establish its presence there and that is what generated the idea for a mega refinery on Maharashtra’s coast. IOC was supposed to have a 50 per cent stake in the refinery with BPCL and HPCL playing the role of junior partners with 25 per cent each.

Aramco’s entry torpedoed IOC’s plan. The state-owned giant could not reconcile to the idea of playing second fiddle to Aramco, which had in the meantime roped in Adnoc of the UAE as a partner in the venture. The domestic players are not really enthusiastic about Aramco’s entry in to the venture but can do little because the Modi government is keen to make overtures to the Saudi regime.

Ever since the success of the Singur agitation in the state of West Bengal in 2007 against the Tata’s small car project wrecked the political fortunes of the Communist Party of India (Marxist), politicians in India have become extremely wary of popular protests against land acquisition to house industrial projects. This is why the BJP government in the state pursued a cautious policy. It abandoned plans for land acquisition in Ratnagiri and agreed to shift the project to the Raigad district.

The new location within the state will not make much of a difference. The Maharashtra state government had become really worried about the prospect of losing the lucrative industrial project to the “business friendly” neighbouring state of Gujarat.

Gujarat, the home state of Prime Minister Narendra Modi, hosts the country’s largest refineries: two refineries of RIL with a total capacity of 68.2 million tonnes per annum (MTPA), the 20 MTPA refinery of Nayara, a Russian company, which originally belonged to the Essar group; and IOC’s 13.7 MTPA refinery at Koyali. RIL and Nayara have their refineries on the developed coast of Jamnagar and Vadinar. Another refinery of 60 million tonnes per annum would have jeopardised the future prospects of the existing players. IOC does not have the same clout in Gujarat as it enjoys in the rest of the country. Narendra Modi is a far stronger politician today than he was two years ago. His writ runs totally in Gujarat.

The vested interests realised that if they could not scuttle the refinery project, it might actually be better to have it in Maharashtra than in Gujarat. Moreover, the political atmosphere is not entirely favourable for the anti-refinery lobby.

For the Modi government, the mega refinery is a prestige project. Its successful implementation can catalyse greater investments. Experts may argue that in a world wrestling with a glut in petroleum products, a new refinery may not be a sensible idea. There is considerable merit in this line of argument. However, the very idea of a mega refinery itself emanated from the demand projections made by the International Energy Agency (IEA). India’s energy pundits invariably go wide of the mark with their projections. The government can safely cite IEA’s projection to buttress its decision to build another giant refinery. But one must wait to see how quickly this project will get off the ground – and whether it will change the landscape for petroleum refineries in this country.



To download the latest issue 'Volume 26 Issue 7 - July 10, 2019', click here
Petro Intelligence [FREE Access]
Modi Govt Gets Ready To Step On The Gas
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Shift Threat Quells Protest Against Aramco’s Giant Refinery
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Adnoc Towers: Vivid Pictures On A Symbol Of Coalescing Interests
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GRM Of Indian Refineries Fall Sharply in FY 2018-19
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BPCL’s Upstream Global Spread: An Update
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