Vienna, September 19: High prices are unlikely to erode India’s booming demand for oil and the country has stepped up negotiations with producer nations to secure its energy supplies, said oil minister Mani Shankar Aiyar.
“Unfortunately the demand for oil is development driven,” Aiyar said in an interview. “The need for development is going to be price inelastic. We just have to find the resources.”
Aiyar was speaking following an OPEC conference in Vienna, on the sidelines of which, he said, he held meetings with 14 other energy ministers.
Progress on energy import deals includes one with Iran to buy liquefied natural gas (LNG) in return for Indian investments in oil and gas projects in Iran.
Aiyar said the deal was close to being finalised and that progress had also been made in acquiring interests for India in Angola, as well as in improving ties with Norway and expanding India’s presence in Sudan.
Indian state-run energy firm Oil and Natural Gas Corp (ONGC) — which Aiyar said had become a “major world presence” as India seeks to tackle its energy needs — has already bought stakes in Sudanese exploration blocks.
Aiyar said a feasibility report was under way on a proposed refinery development in Port Sudan, requiring investment of close to $1 billion.
“Obviously funds will have to be raised,” he said.
Lastly, Aiyar said he had held talks with Nigeria’s presidential advisor on oil, Edmund Daukoru, to try to secure more Nigerian oil for India.
“We would be happy to get another four million tonnes, but anything between the two million (per annum) we have and the six million we would like would be acceptable,” he said. “The presidential advisor has agreed to take it up.”
India’s demand for oil is likely to grow at 4 percent per annum over the next two decades compared with world demand growth of under two percent, Aiyar said.
India imports about 70 percent of its crude oil needs. Last month, Aiyar said he expected India would import 90-95 million tonnes, or 1.8-1.9 million barrels per day (bpd), in 2004/05 against 90.43 million tonnes last year.
The IEA reckons India’s oil demand in 2004 will rise 5.6 percent to 2.46 million barrels per day this year from 2.33 million bpd in 2003.
STUBBORNLY HIGH PRICES
The Organization of the Petroleum Exporting Countries on Wednesday agreed to lift oil supply quotas by one million barrels a day in a renewed attempt to force down stubbornly high world crude prices. Last month, U.S. crude topped $49 a barrel, a record.
Aiyar said he saw no fundamental reason for prices to be at current highs and that psychological factors and speculation had artificially raised levels.
“World supply and demand are in equilibrium,” he said. “It (the price) is driven by a speculative fever which is to be deplored.”
India is also opposed to the so-called Asian premium and Aiyar said crude oil markers used in price-setting — U.S. West Texas Intermediate, North Sea Brent crude and Dubai — were increasingly obsolete.
“The three markers are of declining production centres,” he said.
In a speech in Vienna, Aiyar said that between April and July 2004, Asian countries had paid 36 cents per barrel more than the United States and nearly $3 per barrel more than European customers.
“In India, we estimate the additional burden of the Asian premium at half a billion dollars per annum,” he said.
OPEC President Purnomo Yusgiantoro and Saudi Arabian Oil Minister Ali al-Naimi have agreed to attend a meeting of Asia’s top suppliers and buyers of crude oil in New Delhi in January that will discuss the premium, Aiyar said.