Gujarat and Andhra Pradesh Obtain Saudi-Backed Refineries

The Union government has decided to relocate its ambitious plans for two large oil refineries, each with an annual capacity of 10-15 million tonnes and integrated petrochemical facilities, from Ratnagiri in Maharashtra to Gujarat and Andhra Pradesh. The move comes after discussions with Saudi Arabia to strengthen bilateral energy ties, with the aim of boosting Saudi Arabia’s stake in India’s energy sector and securing a steady flow of crude oil exports to the country.

Oil and Natural Gas Corporation (ONGC) is expected to partner with Saudi Aramco for the refinery in Gujarat, while Bharat Petroleum Corporation Ltd (BPCL) is likely to lead the Andhra Pradesh project. These refineries represent a strategic opportunity for Saudi Arabia to increase its share in India’s crude oil imports, which has been gradually declining in recent years.

The shift in the refinery plans is also tied to the upcoming high-level talks between Indian Prime Minister Narendra Modi and Saudi leadership next month. One of the key focuses of the discussions will be revisiting Saudi Arabia's earlier commitment to invest $100 billion in India, a promise that has seen limited progress so far despite the identification of sectors like railways, ports, and waterways for collaboration.

The Ratnagiri refinery project, initially planned as a mega 60-million-tonne facility in collaboration with Indian Oil, HPCL, BPCL, Saudi Aramco, and Abu Dhabi National Oil Company (Adnoc), faced several setbacks. Local opposition to land acquisition, along with concerns about the feasibility of such a large refinery, led to significant delays. These issues prompted the government to look for more viable alternatives, with Gujarat and Andhra Pradesh emerging as better options for the proposed refineries.

Gujarat, already home to major refineries such as those in Jamnagar (Reliance and Nayara Energy) and Vadodara (Indian Oil), is well-positioned to host another large facility. Andhra Pradesh, on the other hand, has long advocated for a refinery project following the state’s bifurcation in 2014, with the N Chandrababu Naidu-led government strongly urging the Centre to honor its promise.

The relocation of these projects has sparked political debates, particularly in Maharashtra, where several high-profile industrial projects have been shifted to Gujarat in recent years. The move to Gujarat has led to accusations of political favoritism, with opposition parties in Maharashtra criticizing the government for failing to retain key investments in the state.

The shift also highlights the growing importance of Gujarat as a hub for industrial projects, with major projects like the Vedanta-Foxconn semiconductor plant and the Tata-Airbus C-295 aircraft facility also relocating there in recent years.

While the refinery projects in Gujarat and Andhra Pradesh are still in the planning stages, significant groundwork is needed before they can move forward. Saudi Arabia is also seeking assurances through a revised bilateral investment treaty, a key issue under negotiation with India’s Finance Ministry. As discussions continue, alternative arrangements are being explored to address these concerns.