With oil producers’ cartel OPEC playing havoc with prices, India has proposed a grand alliance with top Asian oil buyers like China, South Korea and Japan to negotiate better terms with sellers.
In a throwback to 2005 when the then oil minister Mani Shankar Aiyar had proposed an alliance of the oil consuming nations, Petroleum Minister Dharmendra Pradhan said India will try to create a network with China, Japan and South Korea to take up issues like premium being charged from Asian buyers.
“I see bigger cooperation between four big economies of Asia, that is India, China, Japan and South Korea. India will try to create a network between these four economies,” he told reporters on the sidelines of an industry event on Thursday.
India is the world’s third largest oil importer after China and the USA. Japan is the fourth largest importer and South Korea is right behind it. The four nations account for over a third of the oil imports in the world.
“Why should biggest consumers pay more. Why should these countries pay more in name of Asian premium,” he asked. “All the four major Asian economies should come together. And India will try to create a network for that within the four countries.”
Earlier this month, India and China agreed to join hands to have a collective bargaining power against cartelisation of oil producers. So far, India has not been able to bargain better rates from the Gulf-based producers of the oil cartel, OPEC.
Instead of getting a discount for bulk purchases, West Asian producers, such as Saudi Arabia, charge a so-called ‘Asian Premium’ for shipments to Asian buyers, including India and Japan, as opposed to Europe. According to Prof Yoshiki Ogawa of Japan, the Asian Premium annually costs somewhere around USD 5-10 billion for Asian importers.
Pradhan said like producers have a say in pricing and supply, consumers should also get a say. This is India’s third attempt to unite major Asian energy importers to beat the producers’ cartel.
The then oil minister Aiyar had in 2005 hosted two ministerial roundtables to impress upon the need for a reasonable oil pricing and getting rid of discriminatory Asian Premium — the first involved major Asian consumers such as China, Japan and South Korea and the other roped in alternative oil producers of North and Central Asia.
Aiyar proposed a common front on oil to China’s National Development and Reforms Commission vice-chairman Zhang Xiaoqing. That proposal resulted in a memorandum of understanding in 2006 but it was lost in the complexities of bilateral ties.
Another attempt for joint energy sourcing with Japan was made towards the end of the UPA government when M Veerappa Moily was the oil minister. It, too, failed to see the light of day.
At the 16th International Energy Forum (IEF) ministerial meet earlier this month, India and China, which together accounted for 17 per cent of world oil consumption last year, agreed to look for ways to leverage the combined size of their imports for a better bargain from West Asian crude producers.
By 2023, oil demand will hit 104.7 million barrels per day, up 6.9 million bpd of 2017, according to the International Energy Agency. “As has been the case for some years, China and India together will contribute nearly 50 per cent of global oil demand,” the agency had said in a report.