NEW DELHI: Since March 11, the price of Indian basket of crude has fallen from around $31 a barrel to $25 a barrel on April 22. "The estimated inventory loss of all state-owned companies is around 5 billion to 6 billion, including additional inventory of around 0.7 million tonnes, with prices dipping considerably since the beginning of April," M.S. Ramachandran, chairman and managing director of Indian Oil Corporation (IOC), said here Thursday. "Our loss due to inventory depreciation in April is around 3.5 billion." Ramachandran indicated that things could get worse. "If the current volatility results in a further dip our loss will be around $2 a barrel on the IOC's inventory of 25 million barrels of crude plus petroleum products for about 40 days," he said. Under government directives, state-owned companies had tanked up in expectation of a long war in Iraq and possible disruption of supplies. Making a presentation on "Iraq Crisis - Impact on oil pricing and supplies" at the Confederation of Indian Industry, Ramachandran said in the near term, crude oil prices were expected to remain volatile. A softening of prices to around $21-$22 a barrel can only be expected after August when Iraqi oil production would have been fully resumed. During the war, some of Iraq's southern oil fields, from which India procured Basra Light crude, had been damaged. Getting the oil wells back to production is expected to take around four months. "By August energy experts forecast that Iraq and other countries will have stepped up production leading to a global surplus. With lower demand pressure, the price will be more attractive for countries like India which depend on imports for 70 percent of their requirement," said Ramachandran. Describing the current situation as very fluid, he said much would depend on who took charge in Iraq. Another major factor is whether the Organisation of Petroleum Exporting Countries (OPEC) goes in for a cut in production to boost prices, currently over $30 a barrel. Another factor is whether Iraq will become a part of OPEC, as it was earlier, or the U.S. will keep it out of the organisation. On the prospects of India getting a slice of Iraq's oil and gas sector, Ramachandran said things were still uncertain. The fate of Iraq's Block No 8 awarded to state-owned ONGC Videsh Ltd and the Tuba block for which Indian companies had bid in joint venture are still uncertain. IOC has meanwhile set the ball rolling to find out the fate of the pipeline project from Iraq to the Jordan border that it had bagged in joint venture. Vijay L. Kelkar, advisor to the finance minister, disagreed with Ramachandran's views that India had done too little, too late to participate in Iraq's reconstruction. Kelkar said: "I am more sanguine about India's role in a rule-based regime given the distinct advantage India has in terms of cost and location. We hope to be there when the rebuilding of Iraq unfolds."
Source: IANS