India seeks oil discounts from Opec as it flexes import clout

viernes 5 de junio de 2015 

India is asking Opec members for long-term oil price concessions, its petroleum minister said on Thursday, as it tries to use its growing sway as one of the world’s largest crude importers to lock-in supplies. 

Dharmendra Pradhan told the Financial Times on Thursday he had met with major oil exporting countries in Vienna ahead of Opec’s production meeting on Friday, including Saudi Arabia, Qatar, Angola and Venezuela.

Opec’s members have been engaged in a battle for market share after years of fast-growing US shale oil output and other high cost rivals squeezing the cartel .

“While we value our long-standing relationship with these importers we need to look at our economic interest,” said Mr Pradhan in an interview. “We have to look at who is going to give us the better package — India’s energy requirement will be on an upward path.”

Indian oil demand is expected to rise to 4m barrels a day this year and it is on course to overtake Japan as the world’s third-largest crude consumer in 2016, according to the International Energy Agency.

India’s pro-business government of Narendra Modi has made moves to try and unlock India’s economic potential since he was elected just over a year ago. Lower oil prices have also given the Reserve Bank of India more freedom to cut interest rates and lowered the country’s stubborn current account deficit. 

Mr Pradhan said he was “hopeful” of securing discounts after the discussions with Opec members at a two-day summit for the oil industry organised by the cartel. When it meets on Friday Opec is widely expected to reaffirm its landmark November decision to keep oil output high to try and hurt higher-cost producers.

With China’s economic slowdown blunting its energy appetite, India is expected to account for a growing slice of the increase in global oil demand growth the coming years. 

“Everyone is turning to India,” Mr Pradhan said. The fall in oil prices from above $100 a barrel for most of this decade to around $62 today has come as “timely relief” for the Indian economy, he added. Oil and petroleum products already account for 30 per cent of the country’s imports. 

Countries such as India have been traditionally dependent on crude oil from the Middle East to meet their energy needs and have at times paid a small premium compared to buyers in Europe or the US. Around 85 per cent of India’s oil imports come from Opec nations.

Mr Pradhan said India, which is one of the world’s largest oil refiners despite limited domestic crude production, is targeting Venezuela and other Latin American suppliers in particular to diversify its crude imports.

India’s refineries are now capable of taking “any crude from any part of the world”, he said, adding that the country’s procurement strategy had to change accordingly.

The country’s modern refining fleet does not only supply the domestic market. Companies such as Reliance Industries have exported growing volumes of refined fuels into Europe in recent years, pressuring aging plants in the region that have suffered from lower local demand since the financial crisis.

Mr Pradhan said India was also looking to buy more oil to build up its strategic petroleum reserves (SPR), which should cover around two weeks worth of imports when it is completed by the end of this year. It has been negotiating with Iraq for cargoes to fill its SPR.

India may also look to take more oil from Iran if western sanctions are lifted on its crude exports as part of a comprehensive nuclear deal. Mr Pradhan said he would wait and see if the nuclear deal can be finalised later this month.

India has been one of a handful of countries given a waiver by the US to purchase some oil from Iran, which has limited Tehran’s exports to around 1m b/d.

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