31-03-05 Indian Oil Corporation (IOC) signed a Memorandum of Understanding (MoU) with Saudi Aramco as part of the country's plan for long-term oil contracts with the Kingdom. Abdullah S. Al-Saif, Saudi Aramco's senior vice president of Exploration and Production, said the MoU, signed in the presence of both countries' petroleum ministers, was "a milestone in the steadily developing energy relationship between Saudi Arabia and India."
Al-Saif added: "India is a very important country for us, and we usually complement such close relationships by going beyond the supply of crude oil and entering into downstream partnerships. We look forward to achieving such a goal with India."

The accord calls for cooperation in such areas as production of cleaner fuels, refinery process improvements, corrosion control and biomediation. Azar Khan, first secretary (Commercial) at the Indian Embassy, said the MoU did not relate to oil imports. However, it identified seven areas of cooperation, including research and development. He said India imported $ 4.7 bn worth of Saudi oil -- 26 % of its oil needs -- in 2003.
He spoke after India's Minister of Petroleum and Natural Gas Mani Shankar Aiyar and his delegation returned from a visit to the Eastern Province where they visited the Saudi Aramco facilities, including the Shayba oil field, to identify investment opportunities.

Aiyar and Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi attended the signing ceremony in Dhahran. Abdulrahman F. Al-Wuhaib, vice president of Engineering Services, signed the memorandum on behalf of Saudi Aramco while N.K. Nayyar, director of Planning & Business Development, signed for IOC.
Aiyar cited Saudi Aramco's role as a reliable suppler of crude oil to India, and added: "I would like to see Saudi Aramco as a partner in India's refining and marketing sector."

Khan said a technical committee, consisting of representatives from both sides, will also be set up within the framework of the MoU. To this end, a liaison office will be set up in the Kingdom to carry forward the provisions of the accord. Khan said a member of the IOC has stayed back in Dammam to sort out the terms of the accord.
The technical committee, headed by the Saudi deputy minister of petroleum, will meet alternately in Riyadh and New Delhi, with the first meeting scheduled in the Indian capital at a mutually convenient date. His Indian counterpart on the committee will be the secretary in the Petroleum Ministry.

Earlier, Aiyar disclosed that Hindustan Petroleum Corporation Ltd. (HPCL) was interested in setting up a refinery in Saudi Arabia as part of his country's plan for long-term crude contracts with the Kingdom. A member of HPCL in the Indian delegation also stayed back in Dammam to discuss the details of the joint venture proposal with Saudi Aramco.
India plans to build strategic oil reserves of 5 mm tons by 2008 to cover 15 days' domestic demand for oil products.

India currently imports 24 mm tons crude oil from Saudi Arabia. The country imports nearly 70 % of its crude oil requirements. India is also inviting Saudi investment in oil refining and fuel retailing and exploring opportunities to invest in developing gas fields in the Kingdom. The government is willing to invest up to $ 25 bn for acquiring oil fields overseas.
"We are in a position to raise $ 25 bn," Aiyar added.

Indian state-owned oil firms already have stakes in oil and gas fields in 12 countries -- Russia, Sudan, Iran, Iraq, Libya, Egypt, Qatar, Ivory Coast, Australia, Vietnam and Myanmar. They, however, are far behind Chinese companies.