The Organization of the Petroleum Exporting Countries’ (Opec’s) move to cut crude oil production should not be one-sided and the interest of consumer nations should be taken into account for whom “rationing will be a cause of concern”, Petroleum Minister Dharmendra Pradhan (pictured) said on Tuesday.
The oil cartel has decided to cut production by close to 1.2 million barrels per day (mbpd) following a drop in international crude oil prices in the last one month. “The cut in oil production should not be one-sided. The demand or the requirement of the consuming nations should be taken into account. Rationing of any type is a cause of concern for consumers like us,” Pradhan said on the sidelines of a KPMG summit in Delhi.
The Opec’s decision is likely to push Brent crude oil prices back to $70 a barrel, according to industry experts. On Qatar exiting Opec to focus more on production of natural gas, Pradhan said it would not have any impact on India as it has a diversified crude oil basket.
Qatar’s exit was also triggered by the economic boycott of the country from June 2017 by other Opec members like Saudi Arabia, accusing the nation of supporting terrorism.
Pradhan said the ministry of petroleum and natural gas was in the process of moving the Union Cabinet with a proposal to set up a gas hub that will bring in a new hub-based pricing for natural gas in the country.
“The global investor industry is today keenly looking at the Indian energy sector as an attractive investment destination,” he said.
Brent crude was seen at $60.36 a barrel at one point on Tuesday. If prices go up, it is likely to have an impact on the prices of petrol and diesel too in domestic market, in addition to the pressure on the government over the increase in crude oil import bill.
The share of imported crude oil in India’s overall requirement has increased to 87.5 per cent during the first six months of FY19 from 84.7 per cent during the FY15. India’s crude oil import bill is expected to be $124.73 billion during 2018-19, as compared to $87 billion during the previous financial year.
For every $1 hike in crude oil prices, India’s import bill is expected to increase by Rs61.58 billion, while a change of Rs1 on exchange versus dollar will raise it by Rs66.39 billion.
Addressing the summit, Pradhan said the most transformative reform in the exploration and production sector is moving to a revenue-sharing model and opening the entire sedimentary basin to investors through open acreage licensing.
“Various relaxations have been provided under the existing production sharing contracts to provided adequate flexibility to operators to enable early development of discoveries,” he added.