India-Opec dialogue: Pradhan seeks shift from 'Asian premiums' to `Asian dividend'
22 May 2017
India's minister of state for petroleum and natural gas Dharmendra Pradhan has called on Opec oil exporters to work on an `Asian dividend' for oil sales instead of the `Asian premium' it charges now.
Co-chairing the second India-Opec institutional dialogue at the Opec headquarters in Vienna, ahead of the Opec ministerial meeting scheduled from 25 May, Pradhan stressed the need for a move towards ''Responsible Pricing'' by Opec, which, he said, is important for India for socio-economic and developmental reasons.
Pradhan also held a one-to-one meeting with the Secretary General of Opec Mohammad Sanusi Barkindo. Later he discussed bilateral issues of interest at a delegation level dialogue.
Pradhan highlighted the importance of India-Opec engagement and discussed the effects of the production cut of 1.8 mbpd by Opec and non-Opec countries on the global oil market volatility.
The minister said that India has been and continues to be a reliable customer of Opec countries, as the only big economy where the demand for crude oil continues to rise each year. About 86 per cent of India's import of crude oil, 70 per cent of natural gas, 95 per cent of LPG are from Opec countries.
Pradhan also pointed to the increasing refining capacity of India and future expansion plans. He also briefed Opec about the expanding petrochemical sector in India.
In this context, he underlined the importance of market and reiterated the need to intensify bilateral dialogue to change the nature of engagement from a buyer-seller relationship to an energy partnership. He added that in today's oversupplied market, it was important for producers to understand the perspective of consumers and the demand centers and the changes that have taken place in these demand centres.
He stressed the fact that while the security of supplies was important for consuming countries, the security of demand was equally important for producers. In this context, he emphasised the importance of a purposeful and improved dialogue among producer and consumer countries, particularly benefitting India as a fast growing market.
Pradhan reiterated that as a large import destination there should be no 'Asian Premium' on the crude supplied to India and Asian buyers. He highlighted that India provided timely payments and honored all its contractual commitments and demanded due acknowledgment through discount in prices for large volumes that India imports.
For a long time, Opec subsidised western buyers at the cost of Asian buyers, he said, adding that given the importance of Asian market for Opec, particularly fast growing Indian market which stood by Opec as a reliable and continued customer, Pradhan emphasised on 'Asian Dividend rather than paying Asian Premium'.
The minister also stressed that the Opec should work towards ''Responsible Pricing'' which is important for India for socio-economic and developmental reasons. It would allow India to provide energy to the common and marginalised people who have been deprived of access to energy so far. Higher crude prices would retard growth rate, which will result in slowing down the demand of crude oil.
The minister highlighted that the energy mix in India is undergoing major changes with renewables coming in a big way and pricing of solar energy coming down to 4 cents per unit. There is also a shift in focus to solar, wind, biomass, electric vehicles, hybrid cars etc. He emphasised that the oil industry is at a delicate cross road and higher crude prices will give a further push to renewables.
On the proposed plan of continued production cut by Opec and non-Opec countries, Pradhan said that energy security was a full circle. He said that while the production cut is an attempt to arrest the slide in prices, it also has an inherent chance of under investment and consumer's needs not being met in the long run, which is not in the interest of a balanced and healthy global oil and gas market.