India seeks to diversify oil imports
August 17, 2017,
Suhasini Haider, T.C.A. Sharad Raghavan
Indian Oil Corporation placed India’s first ever shale oil order two days ago with the U.S., according to company Chairman Sanjiv Singh, who said that the prices from the U.S. were very competitive even when compared with those from Gulf nations.
Speaking after his meeting with Turkmenistan Deputy Prime Minister Rashid Meredov in New Delhi on August 14, Petroleum Minister Dharmendra Pradhan said that, regardless of the current tensions between India and China on the border, China was showing keen interest in maintaining business relations between the two countries.
Mr. Pradhan added that the increasing oil imports from new sources such as the U.S. was also putting pressure on OPEC countries to reduce the ‘Asian premium’ on oil prices they charge Asian countries, including India.
“Two days ago, we gave the first shale oil order, the first time shale oil will come to India,” Mr. Singh said, also speaking following the meeting between the two ministers. “And, the U.S. is giving at prices competitive with the Gulf prices. We bought four cargoes [the] day before yesterday.”
“The government supported us in this case,” Mr. Singh added. “We used to buy oil on an FOB (Free On Board) basis. Now, these small shale producers cannot give a complete supply, so we have allowed them to aggregate and ship it to us. It is their ship that will deliver to us.”
Under the FOB model, the buyer takes delivery of the item as soon as it leaves the seller’s shores, which means that shipping costs are borne by the buyer. The deal with U.S. companies by IOC and BPCL, for 3.5 million barrels and 1.9 million barrels respectively, has PetroChina transporting the oil on behalf of the U.S. companies.
China’s ‘red carpet’
“Recently, several ministers have travelled to China and found that, whatever is happening on the border or on the diplomatic front, the Chinese do not want to let business stop between the two countries,” Mr. Pradhan said. “They are showing the red carpet for Indian business.”
Mr. Pradhan was also optimistic about the diversification of oil imports, including from countries like the U.S., as it would put pressure on the OPEC countries to do away with the Asian premium, something India has been arguing for. The increasing cooperation between India and the U.S. was mentioned by President Donald Trump as well.
“We have been asking for the Asian premium to be removed for a while now,” Mr. Pradhan said. “Now, the market dynamics are forcing them to reduce the Asian premium. What was going slow through bilateral engagements, is now being achieved. The American shale oil and gas are coming at a new normal price, and gives us leverage.”
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