Two of the world’s top three oil consumers, China and India, have decided to jointly draw up a strategy for sourcing crude oil from the international market. This grouping could expand, with South Korea and Japan as the other participants.
India and China have questioned on international platforms the practice of charging an Asian Premium by the oil producing nations. According to the plan, the two countries might source crude oil jointly from the West Asian region. China, India, Japan, and South Korea are the top four consumers in the world other than the US, which is the second-largest consumer.
Petroleum Minister Dharmendra Pradhan and China National Petroleum Corporation (CNPC) Chairman Wang Yilin held a bilateral meeting in this regard on Thursday on the sidelines of the 16th International Energy Forum (IEF) in New Delhi. “CNPC is concerned with the issue of Asian Premium. We are looking at further cooperation on crude procurement, scouting for oilfields, bringing in the best enhanced oil recovery activities, and technology sharing,” said Pradhan.
Indian Oil Corporation Chairman Sanjiv Singh will spearhead India’s talks with China in this regard. ”This is just the beginning. The talks are still at an initial stage,” clarified Singh.
The Indian leadership feels Asian countries are paying a price of up to $6 a barrel more than the US or the European refiners to the West Asian oil producers. This is termed the Asian Premium. The world’s largest consumer, China, and the third-largest consumer, India, were vocal on international platforms about this issue.
The decision to cooperate on crude oil comes close on the heels of the elite league of Asian nations, China, Japan and South Korea joining hands to import liquefied natural gas (LNG). Japan’s JERA, South Korea’s state-run Korea Gas Corporation and China National Offshore Oil Corporation had signed a memorandum of understanding to discuss opportunities of collaboration in the LNG business early this year.
“China and India can work together as consumers and energy producers,” said Li Fanrong, deputy administrator, National Energy Administration of China, at a joint press conference. Interestingly, this comes a day after Prime Minister Narendra Modi had stated that the world should move towards ‘responsible pricing’ of crude oil that will balance the interests of both the consumers and the oil producers. China will be hosting the next IEF, while Morocco will be the co-host.
According to the International Energy Agency, the demand for crude oil is expected to grow by 1.5 million barrels per day (mbd) in 2018 to 99.3 mbd, and for the next five years, 50 per cent of the incremental demand is set to come from China and India.
In 2017, China had surpassed the US in annual gross crude oil imports, importing 8.4 mbd, compared with 7.9 mbd for the US, while it was already the largest net importer (imports minus exports) since 2013. Besides, the two sides would also collaborate in other segments of business. Indian companies and China have held stakes in the same blocks already in countries like Iran, Colombia, Sudan, Syria, and Peru. While in Syria, both the countries had even jointly bid in the past.