Post-war Iraq situation may ease oil prices

Wednesday, 23 April 2003, 07:00 Hrs
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NEW DELHI: The fluid situation in post-war Iraq is expected to bring global oil prices down to moderate levels of around $24-$27 per barrel benefiting developing countries like India, say experts.

Right now an expected production cut by the Organisation of Petroleum Exporting Countries (OPEC), to be discussed at a meet in Vienna Thursday, has pushed up prices beyond $30 per barrel.

Experts, however, view this as a temporary phase with prices likely to settle at lower levels in days to come.

"While there has been some hardening of oil prices because of an expected production cut by OPEC, the prices are likely to ease and settle in the $24-$27 per barrel range," Petroleum Secretary B.K. Chaturvedi told IANS.

With the peak winter demand over, experts feel till next September the prices though continuing to be volatile will not reach the peaks seen prior to the U.S.-led war on Iraq. The uncertainty over the war and disruption in supplies from Venezuela and later Nigeria had pushed up prices.

"The oil price movement has been moving on predicted lines. It was expected that if there were no disruption in supplies beyond three weeks, the prices would come down," said V. Raghuraman, energy expert with the Confederation of Indian Industry (CII).

"In around six weeks, Iraqi supplies are expected to resume fully and this will in the short term keep the prices down."

A softening in prices of crude will have the desired effect of easing petroleum product prices in the domestic market, as for the past year India has been adjusting the prices of petrol and diesel on a fortnightly basis according to global market trends.

Depending on imports for 70 percent of its requirements, India is once again looking to resuming supplies from Iraq besides getting a slice of action on the exploration front.

Last year, India received three million tonnes Basra Light crude under the U.N. Oil-for-Food programme. But a few months prior to the war, India switched to spot trading for Basra Light, said Chaturvedi.

India is waiting for the political situation to become clearer before approaching the U.N. and the Iraqi authorities for supplies. Besides being conveniently located, Basra Light is very suited to Indian refinery requirements, say experts.

"We have traditionally had good relations with Iraqis and are hopeful it will continue. We are waiting for the U.N. sanctions against Iraq to be lifted and the international situation to be clear," said Santosh K. Gangwar, minister of state for petroleum, told IANS.

"Whatever the assignment, we are willing to undertake it in Iraq as India is keen that Iraqis have political and economic stability," said Gangwar.

While some experts feel India has played its cards well, others are not too sure how the middle path adopted during the course of war will be viewed by the political regime that takes charge in Iraq.

At stake is one exploration block awarded to India's state-owned Oil and Natural Gas Corporation (ONGC) by the previous regime and another block also in southern Iraq, which was awaiting a formal agreement.

"Much depends on the political scenario that will emerge in the coming days in Iraq. It will take another month or so for the situation to clear. The situation is fluid but not alarming," said Amarjit Singh, secretary general of India Energy Forum, a lobby of domestic and international energy companies.

The experts share the view that traditional good relations between the two countries will not only benefit India in terms of oil supply but also for a role in reconstruction through sub-contracts.

Chaturvedi expressed hope that ONGC will be able to go back to Iraq to undertake exploration and production work as under international norms bilateral country-to-country contracts are generally honoured.

"We will be in touch with the U.N. about the oil block. We hope the commitment of the Iraqi government will be honoured and India will be given more blocks for exploration. We would continue to pursue efforts to get more equity oil in Iraq," said Chaturvedi.

Source: IANS
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