India to lobby for Middle East crude price uniformity

Friday, 20 September 2002, 07:00 Hrs
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NEW DELHI: India will urge Middle East producers to supply crude to all countries at the same freight-on-board (fob) prices at the 8th International Energy Forum (IEF) meet in Osaka from September 21-23.

Petroleum Minister Ram Naik, who is leading a seven-member delegation to the IEF meeting of around 60 oil producing and consuming countries, is once again going to seek concessions for developing countries in view of the spiraling global crude prices.

With the U.S. still doubting Iraq's commitment to allow arms inspectors into the country and the Organization of Petroleum Exporting Countries (OPEC) not agreeing to increase production despite the looming winter in the West, the prices of crude are showing no signs of softening and are maintaining levels of well over $28 per barrel.

OPEC member countries are currently holding their own deliberations at Osaka which will be followed by the IEF meet.

Naik will be addressing the IEF meet during two sessions. The first session he would address will be on 'International prices' and the other on 'How to develop infrastructure activities in developing countries'.

"During one-to-one meetings we will be raising the issue of freight rate disparity with the Middle East producers, who charge the U.S. and the European countries far less than what they charge countries east of Suez Canal," Naik told IANS on the eve of his departure.

"The higher freight rate imposes an additional burden on developing countries like India, which rely on the Middle East for a large part of their supplies," said Naik.

Depending on imports for 70 percent of its oil requirement, the Middle East accounts for over 35 million tonnes of India's annual overseas procurement of about 72 million tonnes of crude.

For the last several years Middle East producers have been giving the U.S. a concession of around $1.5-2 per barrel on the fob price, compared to what they have been charging India and Japan. Similarly, European countries have been getting a concession of around $2.5-3 per barrel on the fob price.

Producers like Nigeria do not follow this practice. These producers have only one traded crude price for all buyers, according to oil industry sources.

India has been urging OPEC members to provide concessional rates to developing countries, on the lines of those provided by Venezuela to its neighboring countries. It has also been lobbying with the OPEC for a longer credit payment period.

"While appreciating the difficulties of developing countries, the OPEC president and secretary general had during our earlier meetings at Brazil expressed their inability to give a collective assurance in this regard," said Naik.

"As the differential in fob rates also works against the interests of developing countries, this is one issue I would be raising with OPEC members during bilateral meetings and at the IEF forum," said Naik.

So far Indian industry-level talks with oil companies in the Middle East have not cut any ice.

The additional 450 per tonne freight cost adds up to a lot. Yet Middle East oil is still attractive given the shorter distance and faster turnaround time of tankers that makes for lower final costs, industry officials admit.

During government-to-government talks, Naik said he would be holding further discussions on India taking more oil equity in some of the producing countries like Egypt, Myanmar, Venezuela and Iran.

Source: IANS
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