Saudi Aramco bids to recover losses through Indian subsidiary   

In a bid to steer the country towards a new economic direction, Saudi oil giant Aramco will open an Indian subsidiary next week to regain some of the market share it has lost over the past few years to competitors around the world.

Rulers in Riyadh have been forced to overhaul major parts of their economy following the collapse in the price of oil and, according to three unnamed sources reported by Reuters, the Kingdom is looking to tap rising demand in the East and invest in the world’s third-biggest consumer economy.

The drop in oil prices has come at a significant cost. Not only has Riyadh lost market share to US shale, the world’s largest oil producer has been losing significant ground to Iran and Iraq, forcing oil heads in the Kingdom to search for new markets to recover their losses.

The Kingdom’s desire to become India’s top oil supplier ahead of Iraq has prompted Aramco to invest in refineries in India and other major markets. It’s thought that locking-in additional customers ahead of its initial public offering next year, will place Aramco in a better position.  According to the sources, its India unit will look for opportunities to take stakes in refining and petrochemical projects in the country.

Aramco Chief Executive Amin Nasser will inaugurate Aramco Asia India during a visit to New Delhi next week to attend the IHS-CERA conference, which starts on Sunday and which will also be attended by OPEC Secretary General Mohammed Barkindo, reported Reuters.

Nasser will also meet Indian Prime Minister Narendra Modi on Monday as part of an industry delegation to discuss investment in the oil and gas sector, one of the sources said.

The announcement coincides with the visit by King Salman to Russia. The first royal visit to Moscow will see the two leaders agree on a number of deals including a treaty to keep oil production down to halt the oil glut, which has seen oil prices drop way below the International Monetary Fund estimates for Saudi Arabia’s break-even oil price. With the current price of a barrel of oil dropping to $53 and the Saudi break-even price said to be $84, the Kingdom’s economy is haemorrhaging a loss of $31 per barrel.

According to the Financial Times, the Kingdom is running large fiscal deficits and has seen its foreign reserves dwindle by almost a third since the end of 2014, to below $500 billion.