India seeks to improve ties with its main oil supplier by including Saudi Arabia's Aramco in its projected 6.5 million metric tonnes (MMT) strategic petroleum reserve (SPR) initiative. For years, the two countries have discussed Aramco's involvement in the SPR initiative. However, after Crown Prince Mohammed Bin Salman's meeting with Prime Minister Narendra Modi last month, the negotiations gained momentum.
The Indian government stated in an internal document that "Saudi Arabia's Aramco can be invited to participate in Phase II" and that construction of two new commercial-cum-strategic petroleum reserves of 6.5 MMT have been approved under the Phase II Strategic Petroleum Reserves Programme. India revised its SPR policy in 2021, adopting a strategy that was used by nations like Japan and South Korea and permitting the commercial sale of crude to encourage private investment in the construction of new storage facilities.
India, the third-largest importer and consumer of oil in the world, has developed strategic storage at three locations in southern India to hold more than 5 million tonnes of oil to guard against supply disruption. India imports more than 80% of its oil needs. The 1.5 million tonne SPR in the southern city of Mangaluru is home to 750,000 tonnes of oil storage that Abu Dhabi National Oil Company (ADNOC) has leased.
According to a government release, India has held two road shows for the second phase of its SPR plan and garnered interest from businesses such as Trafigura, British Petroleum, Petrochina, Hyundai, Gulf Energy, Glencore, and Shell. Anish De, a partner at KPMG, commented on a potential transaction between Saudi Aramco and India, saying that "getting the investment there will align the economic and political interest". The two nations are acting for good political and economic reasons.