India asks OPEC to stop charging premium
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 <g data-gr-id="33">predecessoars</g> particularly Mani Shankar Aiyar had in past vociferously raised the issue of OPEC members charging the so-called premium from Asian <g data-gr-id="43">buyers</g> but the cartel has refused to act on the issue.
“There is a strong feeling that Asian <g data-gr-id="28">counties</g> like India should receive Asian dividend rather than paying Asian Premium while making <g data-gr-id="39">bulk</g> 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 <g data-gr-id="30">fourth largest</g> petroleum consumer also asked OPEC to <g data-gr-id="29">revist</g> its policy of seeking <g data-gr-id="40">letter</g> 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 <g data-gr-id="47">European</g> average of 6.5 and US average of 9.5.
“There is <g data-gr-id="46">big</g> 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 $600 billion in <g data-gr-id="36">energy</g> sector between 2011 and 2030, he said New Delhi was keen on forging <g data-gr-id="37">partnership</g> with OPEC nations. Pradhan said after three years of relative stability of oil prices averaging around $100 per barrel, oil prices declined sharply in 2014.