Financial Daily from THE HINDU group of publications
Thursday, Sep 09, 2004
Industry & Economy
OPEC not to consider India's plea to cut crude prices
Balaji C. Mouli
Sydney , Sept. 8
The OPEC is slated to meet next week in Vienna. "We have received a letter from the Indian Government on the matter. However, it is not for OPEC to consider such proposals. Such negotiations can be done only on a bilateral basis," Dr Purnomom Yusigiantoro, Secretary General, OPEC, said on Wednesday at the World Energy Congress (WEC) in reply to a question from Business Line.
Last month, the Petroleum Minister, Mr Mani Shankar Aiyar, said in New Delhi that India would be raising the issue of OPEC countries charging a $1 per barrel premium on crude oil sold to the Asian countries.
India imports 70 per cent of its crude oil requirements. It imported 90.83 million tonnes in 2003-04 for around Rs 84,000 crore.
During the first quarter of the current fiscal, crude import bill jumped 51 per cent over the previous quarter's bill to around Rs 30,000 crore, driven by high global crude prices.
Speaking at the World Energy Congress (WEC) here, Dr Yusgiantoro said that `exceptional conditions' were responsible for $10-15 per barrel in the current price of crude which is hovering around $40 per barrel price.
"This ($10-15 per barrel premium) is between about one-fourth to one-third of the current market price. This restricts room for manoeuvre," he argued.
"I expect the exceptional factors to mitigate once elections are held in Iraq early next year and, hopefully by then, there will be some peace in the region," said Dr Yusgiantoro, who is also the Indonesian Minister of Energy and Mineral Resources. This way, Iraqi oil will flow into the market and aid in softening prices.
"The starting point for sound investment strategy is market order and stability today, with reasonable, predictable prices," he argued.
According to the OPEC chief, the global market is well supplied with crude.
However, it is the "higher than expected demand, geopolitical tensions, downstream bottlenecks and speculation" that have resulted in the hardening of crude oil prices.
The OPEC producers have a spare capacity potential of around 1-1.5 million barrels per day.
The OPEC countries have a proven crude oil reserve of 891 billion barrels, or 78.3 per cent of the world's reserves, pointing to more reliance on OPEC oil in the future, according to the OPEC chief.
The key long-term issue facing the OPEC countries is the uncertainty over investments in the future.
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