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India, China may join hands to counter oil price rally

Indian Oil Corp. Ltd chairman Sanjiv Singh. Prime Minister Narendra Modi on Wednesday called for a global consensus on “responsible pricing”.

New Delhi: India and China may come together to protect their interests as consumer nations, in the backdrop of rising global oil prices after the Organization of the Petroleum Exporting Countries (Opec) and Russia cut supplies.

State-run Indian Oil Corp. Ltd chairman Sanjiv Singh and China National Petroleum Corp. (CNPC) chairman Wang Yilin have been tasked with exploring such an engagement, which may also include joint sourcing of energy supplies, including crude oil, according to oil minister Dharmendra Pradhan.

This assumes importance given China and India are the world’s second and third largest energy consumers, respectively, and signals an impending change in the global energy architecture, with buyers at the centre of oil majors’ future growth plans.

In response to a query about whether India and China will join forces in the backdrop of a global oil rally due to production cuts, Li Fanrong, deputy administrator, National Energy Administration, China, said at a press conference that this is an area where both India and China can work together.

“Join hand in hand as a consumer and also the energy producer to safeguard energy security…It is most important to provide affordable, reliable, sustainable energy supply to our people,” he said, speaking on the last day of the 16th International Energy Forum Ministerial (IEF-16).

“There is a lot of scope for cooperation and being a consumer, commodity price is an issue. So, multidimensional efforts are there to reduce the cost of price,” Dharmendra Pradhan, India’s petroleum minister, said at the same press conference.

India’s Oil and Natural Gas Corp. Ltd (ONGC) and CNPC had inked an agreement in 2012 to jointly bid for energy assets overseas.

Prime Minister Narendra Modi on Wednesday called for a global consensus on “responsible pricing.”

Pradhan referred to Modi’s speech and said, “Looking into that strategy, more cooperation in future on multilevel with China is expected and today we have had a very good discussion with CNPC chairman and we are hopeful that the consumer can dictate, can influence, can rationalise the future price of oil.”

India’s worry over crude oil prices stems from its energy needs being primarily met through imports, with the country importing 214 million tonnes of crude oil in 2016-17. Extreme volatility has marked crude oil prices, which hit a record $147 per barrel in July 2009.

“We are competitors. Certainly they have their own ambitions. Sometimes our companies also compete with each other. There is nothing wrong in that. Fair competition should be there in business but as a diplomatic partner, as a strategic partner, we have some mutual interests,” Pradhan said.

In response to a query about whether this cooperation between the two major consumers would include joint purchase of crude oil, Pradhan said, “It is a multidimensional issue. I can sight two examples—Yes, CNPC chairman is also equally concerned about the so called Asian premium. Since, last few years we have been raising this issue on the world platform.”

India has been demanding a concession rather than having to pay the so-called Asian premium given that India is one of the major Opec consumers.

“If China and India are on the same page regarding Asian premium that is a big statement,” Pradhan said.

This comes at a time when the cost of India’s basket of crude, which averaged $47.56 a barrel in 2016-2017, touched $63.80 (average price) in March 2018, according to information from the Petroleum Planning and Analysis Cell.

Saudi Arabia’s energy minister Khalid Al-Falih on his part has defended the cuts and said that it will not allow a global glut to build up.

“As external affairs minister, energy is occupying more and more space in my world view,” said Sushma Swaraj at the concluding session of the IEF-16.

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