Minister invited to organisation’s international meet this week
In what is a clear indication of India’s emergence as one of the world’s biggest energy consumers, Abdalla S El-Badri, secretary general of the Organization of the Petroleum Exporting Countries (Opec), has extended an invitation to oil minister Dharmendra Pradhan for the organisation’s international meet this week in Vienna.
This comes at a time when India, which features among top-five oil refiners, is looking to diversify its crude sourcing to Latin America and cut dependence on West Asian suppliers, which dominate Opec.
Pradhan, who is expected to attend the 6th OPEC International Seminar in Vienna on June 3-4, is likely to push for better oil purchase deals from the member countries.
“There are so many issues to be discussed with Opec members. We are getting our major supplies of crude from OPEC and there are multiple issues to be taken up,” Pradhan told FE.
India, one of the world’s top oil importers, has increased its crude purchases from overseas by nearly 19% to 189.43 million tonne in FY15, compared to 159.25 million tonnes in FY10.
Of India’s total crude imports, at least 50% is sourced from West Asia or Opec member countries including Saudi Arabia, Kuwait, the UAE, Iran and Iraq.
“We would be discussing with all of them (member countries) the strategy on issues such as Asian premium. We want to seek investments and extend the buyer-seller relationship into stronger ties,” Pradhan explained. The petroleum minister’s visit would probably be the first ‘institutional’ representation of India in an Opec meet, which discusses crucial issues such as pricing and supply of crude oil from its 12 member countries.
AK Sharma, director (finance) at IOC, said that till last year, Asian premium was prevalent, which makes crude coming to countries like India expensive by anything between 2 cents and $2/barrel. However, the scenario is changing as West Asia suppliers are looking to sell more crude to Asian buyers.
According to the Energy Studies Institute at National University of Singapore, there is a widely held perception that Asia has been paying a premium for its crude oil, the so-called ‘Asia premium’.
More recently, it has been argued that the premium has been reversed because Asia has emerged as the dominant consuming region, forcing West Asia oil producers to reduce prices relative to other oil consuming regions, such as Europe and the US.
India wants to increase its crude imports from Latin American nations such as Venezuela, which is also an Opec member. This is for two reasons. First, Indian refineries are now capable of processing cheaper, low-quality crude from Latin America and, second, West Asia suppliers are neither ready to sweeten deals and nor are they showing keenness to invest in India’s oil and gas sector.
“Heavy quality of crude are coming from Latin America,” said Sanjiv Singh, director (refineries) at IOC, adding that the refiner has started processing crude from Venezuela, Brazil and Mexico.
The country’s biggest refiner processed 174 different grades of crude in FY15 against 146 in FY13.