GLOBAL EYE. A watershed in India’s oil diplomacy

There were some interesting firsts at the meet of the Organisation of Petroleum Exporting Countries in Vienna on May 25 , which was attended by members and non-members. India was represented by Dharmendra Pradhan, the minister for petroleum and natural gas, and was unusually assertive in a meeting where it previously had little voice or attention.

Co-chairing the India-OPEC Institutional Dialogue, and in his meeting with the secretary-general of OPEC, Mohammad Sanusi Barkindo, Pradhan didn’t mince words in stressing that OPEC needs India far more than India needs OPEC. This, at a time when about 80 per cent of India’s import of crude oil, 70 per cent of natural gas, and 95 per cent of LPG are from OPEC countries,had the hosts surprised.

He stressed that while the security of supplies was important for consuming countries, the security of demand was equally important for producers. He said the global oil industry today stands at a “delicate crossroads”, and indicated that any attempt to frustrate or assign lower importance to Indian demand would be detrimental to the suppliers.

Interestingly, Pradhan also touched upon the controversial ‘Asian Premium’ charged by OPEC suppliers — while western buyers are subsidised Asian buyers are charged higher for crude imports. Since the 1990s, poorer importers (read Asian countries) have been charged a premium, while huge discounts have been offered to the US and Europe.

The Institute of Energy Economics, Japan, estimated the premium to be between $1/barrel to 1.5/barrel for Asian importers since 1992, leading to tens of billions of dollars of premium paid till date.

When Mani Shankar Aiyar waspetroleum minister he had asked Asian importers to unite to end this system, but backtracked later.

With West Asian suppliers jostling to maintain or increase market share in India’s burgeoning oil demand, it was fair for the country’s petroleum minister to sternly ask of his hosts to see the writing on the wall.

The steep decline in renewables, the opening up of newer avenues (read Iran, US, Canada) and lessening dependence on traditional sources brings about a new confidence in India’s energy roadmap. For the first time, India behaved as a mature buyer, and asserted every bit of its third largest oil importer status.

The secretary-general acknowledged that India’s oil demand would rise by more than 150 per cent by 2040 to about to 10.1 million bpd, accounting for 9 per cent of global demand, from 4 per cent now.

This was on the back of energy consumption headroom in India, where per capita energy consumption is at 0.55 tonnes of oil equivalent, far below the global average of 1.9 tonnes.

While OPEC was just about coming to terms with this rude change in a historically unequal relationship, India landed another win on the energy front this August. A win, with far-reaching economic and strategic consequences: India bought US crude for the first time ever.

A beaming Indian ambassador to the US, Navtej Sarna, was seen handing over papers for the shipment to Texas Governor Greg Abbott. A small consignment of 2 million barrels costing close to $100 million might just be the start of India’s energy relationship with a most willing, competitive and dependable energy player on the global canvas.

Though ostensibly, production cuts by OPEC and the subsequent rising of prices of their high sulphur crude seem to be the reason, it is actually a masterstroke by India’s energy mandarins.

President Donald Trump welcomed this move over a phone call with Prime Minister Narendra Modi and appreciated the fact that Indian companies have invested close to $5 billion in shale assets in the US.

Though it might be early to say, with US shale entering the export arena and steeply dropping renewables, oil watchers are betting on crude prices for India staying at sub-$60 levels for quite some time. For India, where the two unknowns of global oil prices and monsoons have played a sinister role in any predictable or deserving growth, at least one unknown seems to receding.

The writer is a geo-political analyst

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