India will consider buying more oil from countries outside the OPEC bloc, its biggest supplier, at cheaper prices as the cartel’s production cuts have pushed crude higher.
The country expects Oil and Petroleum Exporting Countries, which account for more than 83 percent of India’s imports, to offer a “reasonable and affordable price” on future contracts so that the gains can be passed on to domestic consumers, Petroleum and Natural Gas Minister Dharmendra Pradhan said at a press conference in New Delhi today. The OPEC makes up 40 percent of global oil production and there’s a need to look at the producers of the remaining 60 percent, he said.
The output curbs that OPEC nations agreed to in November 2016 have since pushed Brent crude 30 percent higher to just under $70. Retail prices of petrol and diesel in India, which relies on imports to meet 80 percent of its oil needs, have risen sharply. That led to demands for cuts in taxes on fuel to cushion consumers. Higher prices also inflate Asia’s third-largest economy’s import bill.
"Being a big consumer and a big market, we have price-sensitive consumers,” Pradhan said. “Our primary hydrocarbon requirement is crude oil and the anxiety is related to crude oil. So, we expect a reasonable price, if not very low price.”
Pradhan said the new normal of oil price is here. “It has to be sensitive, it has to be affordable for our consumers. So, again and again, through new business models, we expect cooperation from big producers. The U.S. shale production has put an end to monopoly in the (global) market.”
The minister didn’t say whether the Indian government is in talks with countries outside the OPEC cartel, such Russia and the U.S., to diversify its oil and gas purchases. India has, meanwhile, been increasing its natural gas consumption.
The first cargo of liquefied natural gas from the U.S. will land on Friday, Texas Governor Greg Abbott, who also addressed the conference, said. It’s a 20-year contract and Texas is adding more LNG facilities to meet a potential increase in demand from an expanding Indian economy.
The cargo set sail earlier this month from the Cheniere Energy’s LNG export facility at Sabine Pass to GAIL (India) Ltd.’s Dabhol terminal in Maharashtra. As part of a 2011 deal, the state-run gas distributor would purchase about 3.5 million metric tonnes of LNG each year from Sabine Pass.
Indian oil and gas companies have invested more than $5 billion in hydrocarbon assets in the U.S, and signed contracts to buy more than nine million metric tonnes of LNG on a long-term basis, Pradhan said.