Vienna: Seeking fair pricing of oil, India Wednesday asked oil cartel OPEC to stop charging premium from its Asian buyers and offer better trade terms like selling oil without payment guarantee and on extended credit period.
Reiterating New Delhi's decade-old demand, Oil Minister Dharmendra Pradhan said the Organisation of Petroleum Exporting Countries (OPEC) is not justified in asking Asian buyers to pay more so that transportation cost to distant consumers particularly in the West can be subsidised.
Pradhan's predecessoars particularly Mani Shankar Aiyar had in past vociferously raised the issue of OPEC members charging the so-called premium from Asian buyers but the cartel has refused to act on the issue.
"There is a strong feeling that Asian counties like India should receive Asian dividend rather than paying Asian Premium while making bulk purchase of crude. I will not hesitate to say that Asian Premium was historically never justified and more so not justifiable in the changed market scenario where Asian countries are the major buyers," Pradhan said addressing the 6th OPEC International Seminar here.
He said, "Any measure that erodes the advantage of geography for Asian countries and promotes a policy of subsidising oil traffic to distant destinations is not, and cannot be, in the interests of sustainable development."
The world's fourth largest petroleum consumer also asked OPEC to revist its policy of seeking letter of credit as payment guarantee from regular and bulk buyers and demanded that it consider extending the credit time for crude import.
India, he said, has most cost effective yet modern and complex refining capacity with Nelson Complexity ranging from 10 to 14 as compared to European average of 6.5 and US average of 9.5.
"There is big strength of India in this sector. Hence, it is in everyone's interest to refine crude in India in the most cost-effective manner. If we receive crude at a fair price without paying Asian Premium, our gross refining margins will improve and it will result in competitively priced petroleum products," he said.
Pradhan said oil prices must be high enough to ensure a fair return for producers and sufficient to attract investment in future production capacity. "But, if prices are too high, they will drive people away from oil to other fuels."
He invited OPEC member nations to invest in India's refining, petrochemical, LNG and oil and gas exploration business.
Stating that IEA has estimated that India needs USD 600 billion in energy sector between 2011 and 2030, he said New Delhi was keen on forging partnership with OPEC nations.
"I see four areas (i) sourcing more crude in fair terms user-friendly policies (ii) investment from and in India in exploration and production activities (iii) investment from and in India in Downstream activities and (iv) service contracts to Indian companies - as a comprehensive and integrated package for developing the international energy partnership," he said.
Pradhan said after three years of relative stability of oil prices averaging around USD 100 per barrel, oil prices declined sharply in 2014.
"There are various explanations given for the fall in oil price. Some see this as a result of sudden increase in global supply of oil due to US shale revolution; some attribute geo-political reasons to this and some argue that this was inevitable since oil prices were artificially high in the past several years," he said.
Stating that the world energy map has changed, he said new prominent supply sources have emerged in various continents whereas major demand centres and buyers are all concentrated in Asia.
He said the recent fall in oil prices has come as a relief for Indian economy and consumers. "This has resulted in lower levels of inflation and we stand to benefit from higher disposable income which results in higher consumption, decrease in the cost of production of final goods particularly for energy intensive industries and an improved external trade balance."
He said 85 percent of India's crude import and 94 percent of its gas comes from OPEC countries.
"India believes in integrated approach to energy security. While our crude purchase is going to grow substantially, we want to graduate from a traditional buyer-seller relationship to a long-term energy partnership," he said.
Stating that there was a need for greater dialogue and cooperation between buyer-seller nations to ensure sustainable development, he said, "global partnership between buyer and seller nations would ensure stability, security and sustainability through mutual inter-dependence."
