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India says OPEC members not meeting June decision to raise output
India on Tuesday said that some members of the Organization of Petroleum Exporting Countries (OPEC) have not made good their June decision to increase output by one million barrels per day (bpd) or about 1% of global supply. “OPEC promised something in June—there will be an additional production of one million barrels per day after their decision of capping output. But according to our information, though Russia and Saudi (Arabia) have increased their production, some countries are still lagging behind,” oil minister Dharmendra Pradhan said at the India Energy Forum on Tuesday.
Opec accounts for about 40% of global production and the grouping’s June decision came against the backdrop of calls from the US, China and India to help moderate prices. India has also been reminding Saudi Arabia of OPEC’s promise. Pradhan added that the issue was not of ‘shortfall’, but of ‘sentiment.’ “With that also, there is no issue of availability of crude oil today. But due to some geo-political uncertainty in different parts of world, not only in Iran, there is a sentimental issue. So that’s the primary challenge. We are confident from Day One, I am of this opinion, there is no problem in the sourcing of crude. There is plenty of crude available in different parts of the world,” Pradhan said.
He also clarified the National Democratic Alliance (NDA) government’s decision earlier this month to effect a Rs 2.50 per litre cut in the prices of petrol and diesel to ease inflationary pressure and boost consumer confidence. Out of the Rs 2.50 cut, the Centre reduced excise duty by Rs 1.50 per litre, while state-run fuel retailers will take a hit of Re 1 for every litre sold. “The government has no business to interfere in the pricing mechanism of petroleum products. This is a day-to-day price mechanism developed by respective companies. So the government has a role in the tax, what we have done last week—10 days back,” according to Pradhan.
OPEC on Tuesday forecast an imbalance in 2019 due to a larger supply growth. Also Khalid A. Al-Falih, Saudi Arabia’s energy, industry and mineral resources minister and chairman of the world’s biggest oil producer, Saudi Arabian Oil Co. (Saudi Aramco) at the India Energy Forum, on Monday said the fundamentals of the current oil market were ‘quite balanced.’ “Non-fundamental factors, beyond the control of any individual stakeholder, can have a particularly strong influence on our industry. Geopolitical events, natural catastrophes, technological breakthroughs or other critical uncertainties — we are all only too aware of the impact they can have. This has been particularly apparent in recent months,” said Mohammad Sanusi Barkindo, secretary general, Opec.
Growing tensions between the US and Venezuela, with the US demanding a global end to the import of Iranian oil by early November, and the rupee’s performance as Asia’s worst performing currency, have exacerbated the situation, putting India, the world’s third-largest oil importer, in a spot. India has called for a global consensus on “responsible pricing” against the backdrop of rising oil prices after supply reductions by Russia and OPEC.
Also, India has been consistently pitching for a price and terms correction on the so-called Asian premium crude. With most Asian countries being primarily dependent on West Asia to meet their energy needs, customers from the Continent are seen paying the Asian premium owing to this dependence, against prices paid by the US or the European Union. “The interconnectivity of our world means that the only way we can overcome common challenges is through international cooperation and teamwork,” Barkindo added. “OPEC is right.
Everybody has to ensure market stability. This is beneficial for consuming countries. This is equally beneficial for producing countries,” Pradhan said. This also comes at a time of impending sanctions on Iran. India plans to continue its energy imports from Iran even in the wake of the US government’s 4th November deadline. India is a top buyer of Iranian oil. Of the 220.4 million metric tons (million MT) of oil imported by India in 2017-18, about 9.4% was from Iran. In response to a query regarding India’s preparation in the wake of Iran sanctions, Pradhan said: “I don’t want to add anything new. I have already given my opinion (about) India’s approach towards our requirement and we have done something. There is nothing new to repeat.”
Global demand for oil is expected to increase by 33%, or 91 million barrels oil equivalent per day (mboed), between 2015 and 2040, according to OPEC. “A massive 24% of this anticipated increase, 22 mboe/d, will be from India,” Barkindo said. “World oil demand is expected to increase by 14.5 mb/d (million barrels per day) — from 97.2 mb/d in 2017 to 111.7 mb/d in 2040. India will account for an oil demand growth of 5.8 mb/d, representing astonishing 40% of the overall increase.” Also, this will involve a global oil sector investment of around $11 trillion till 2040.
In a separate development, PTI reported that French energy giant Total SA was in discussions with multiple Indian companies to acquire a stake in LNG import terminals and city gas distribution projects, and also interested in setting up petrol pumps in India. India on Monday sought a review of payment terms with major oil producers as part of the government’s strategy to help counter a depreciating rupee and rising global crude oil prices. The pitch was made by Prime Minister Narendra Modi during his third meeting with top executives of global oil companies and experts from the energy sector.
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