Abu Dhabi National Oil Company (ADNOC) on Monday signed an initial agreement to pick up a stake in the planned $44-billion refinery-cum-petrochemical project in Ratnagiri, Maharashtra.
ADNOC joins Saudi Aramco, the world's largest oil producer, in the project which is planned to come on stream by 2025.
"Saudi Aramco and ADNOC will together hold 50 per cent stake. The terms are being discussed," Aramco CEO Amin Nasser told reporters after inking the pact.
Originally, ADNOC was to sign the pact when Oil Minister Dharmendra Pradhan visited UAE last month but the event got pushed back.
Aramco had, at the agreement signing event, stated that it will at a later date dilute some of its 50 per cent equity stake in the 60 million tonne-a-year refinery project in favour of another strategic investor.
Now, the Saudi national oil company is diluting some of that stake to ADNOC.
Nasser did not give the exact split of stake between Saudi Aramco and ADNOC.
As per the April agreement, Aramco is to supply half of the crude oil required for processing at the refinery that will be commissioned by 2025. ADNOC will now supply some of the crude to be processed at the unit.
State-owned refiners Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) will own the remaining 50 per cent stake.
Like other major producers, Aramco and ADNOC are looking to lock in customers in the world's third-largest oil consumer through the investment. Kuwait too is looking to invest in projects in return for getting an assured offtake of their crude oil.
Last year, Saudi Arabia invested in refinery projects in Indonesia and Malaysia that came with long-term crude oil supply deals.
Saudi Arabia was the biggest oil supplier to India till 2016-17, but slipped behind Iraq last fiscal. It had supplied 39.5 million tonnes of crude oil to India in 2016-17, ahead of 37.5 million tonnes by Iraq.
But in the first 11 months of 2017-18 fiscal, Saudi supplies at 33.9 million tonnes lagged behind Iraqi exports of 42.4 million tonnes to India.
UAE supplies a small quantity of oil to India.
Aramco is also keen on venturing into fuel retailing in India.
India has a refining capacity of 232.066 million tonnes, which exceeded the demand of 194.2 million tonnes in 2016-17 fiscal.
According to the International Energy Agency (IEA), this demand is expected to reach 458 million tonnes by 2040.
IOC has 11 refineries with a total capacity of 81.2 MT, while BPCL has four refineries with a total capacity of 33.4 MT. HPCL has three refineries with a total capacity of 24.8 MT.