Kuwait Petroleum Corporation (KPC), which had dithered on an investment in the Paradip refinery back in the nineties before eventually backing out, may now have good reason to rue its decision. Almost 25 years later, it is desperately scouting for an opportunity to shovel its money into a refinery project in India. But it is now awakening to a bitter truth: the state-owned refineries in India aren’t interested in its money. Most of these companies are flush with funds themselves and can meet the cost of their expansion projects out of their own resources.

This is the main reason why KPC has found itself stymied as it hunts for an opportunity to pick up an equity stake in an existing state-owned refinery. Kuwait Petroleum International (KPI), KPC’s overseas investment company, which at one stage zeroed in on Bharat Oman Refinery Ltd (BORL) as a suitable project, has given up hope of clinching a deal for the time being.

BORL is a joint venture between Bharat Petroleum Corporation Ltd (BPCL) and Oman Oil Company (OOC) in which the partners have equal stakes. But Oman Oil Company baulked at the idea of pumping in money when the refinery decided to expand capacity from 120,000 barrels per day to 156,000 bpd. As a result, BPCL may have to raise its stake in the refinery to 74 per cent. KPC has been eyeing the 26 per cent stake held by Oman Oil Company but the latter may not want to quit India at a time when Middle East companies are competing to grab market share in an increasingly attractive Indian market.

KPC’s Indian strategy is in disarray. Kuwait used to be one of the largest suppliers of crude oil to India right up to 1990s. Its share came down gradually and it now accounts for only 6 per cent of India’s crude oil import. Kuwait should never have been cast in the role of a laggard. It was the first Middle East company to propose an investment in a new refinery project at Paradip in Indian state of Odisha and even signed a MoU with promoter IOC to pick up 26 per cent stake.

It is still a mystery why KPC backed out of the project. Although neither side disclosed the real reason behind the collapse of the MoU, sources say both sides wrangled over marketing rights. The Paradip project languished for more than 15 years and was commissioned only in 2017. The episode left Indian PSUs with the impression that KPC was an unreliable partner – and that is why they have been cool to its overtures now.

KPC re-entered the Indian refinery scene last year after Saudi Aramco clinched the 60 million tonne per annum mega refinery deal. Aramco roped in Abu Dhabi National Oil Company (ADNOC) as a partner. KPC does not normally figure in Aramco’s scheme of things. KPC has not so far shown interest in any other area for investment in India even as ADNOC is going ahead with its plans to fill India’s crude storage caverns and has been trying to entice Indian PSUs with the offer of stakes in its upstream fields and exploration blocks. Industry circles even hint at the possibility of ADNOC partnering the state-owned companies in the second phase of building crude storage caverns which will come up under the Public-Private Participation (PPP) model. Aramco is trying to team up with Reliance Industries in refinery and petrochemical sectors even as it remains committed to the mega refinery project that the state-owned companies have proposed on the west coast, but stuck over the choice of a suitable location.

Bilateral relations between India and Kuwait remain friendly and Kuwait is keen on making an investment in the refinery sector. It does not have high ambitions for the Indian market; it just wants a maximum of 26 per cent equity stake in any of the existing refinery projects. Indian Oil Corporation (IOC) is not keen to have it as a partner in any of its refineries. BPCL, which had shown initial enthusiasm, has now cooled to the idea and is not keen on further discussions. HPCL does not have any new project where it can be accommodated.

Kuwait’s presence in the Indian refinery sector will certainly give a further boost to the country’s petroleum sector but this perception is not shared by the PSUs. Foreign investments invariably come with elaborate conditions. Oil companies investing in a refinery project will try to drive a hard bargain for marketing rights. India’s petroleum retail market is virtually controlled by the three PSUs who are reluctant to part with those rights. In fact, all the three marketing companies, which together own 2/3rds of the country’s refining capacity, have now decided to almost double their retail networks in the next five years. This will inevitably forestall the entry of a foreign company into the retail market.

KPC is not interested in retailing. Its first priority is to find a refinery where it can come on board as a partner. At this stage, Indian PSUs cannot be expected to accept any unpalatable conditions. They are in fact in a position to dictate terms to foreign investors. The Indian market has grown dramatically and the companies in the Gulf, which all along had been keen to strike deals in the west, now find that they may have missed the bus.