Genuine market mechanism must determine prices

Abu Dhabi: India supports reasonable and responsible crude prices which are in the interest of both producing and consuming countries, the country’s minister for petroleum and natural gas, Dharmendra Pradhan, told Gulf News on Saturday.

“Prices today are much higher than what we regard as reasonable crude price. We are also of the view that genuine market mechanism must determine crude prices rather than a group of countries trying to influence crude prices through production cuts,” he said.

Pradhan is on a three-day visit to the UAE and will participate in the downstream investment forum in Abu Dhabi on Sunday.

India is already engaging with other major consumers in order to deal with artificially high crude prices, he said. “We have also initiated an institutional dialogue with Opec in the last 2 years for promoting our engagement with both Opec as an organisation as well as member countries of Opec.”

Oil prices are currently trading higher due to geopolitical tensions in the Middle East and due to production a cut agreement between Opec and non-Opec members to reduce global oil inventories and prop up oil prices.

Brent, the global benchmark is trading above $77 per barrel and US crude West Texas Intermediate above $70 per barrel. Oil prices rose in the last few days following the decision of the US president Donald Trump to exit Iran nuclear deal.

On Trump’s decision to withdraw from the Iran deal, Pradhan said they are keeping a close watch on the evolving situation and analysing the impact of the recent decision by the US.

“The Indian government is committed to pursuing all measures possible in order to ensure India’s energy security and procurement of crude at best possible prices,” he said without elaborating further. India is one of the major importers of crude oil from Iran.

India, UAE energy ties

Speaking on the energy ties between the UAE and India, the minister said the ties have witnessed a meteoric rise in two-way investments over the last few months.

A consortium of three public sector enterprises of India was awarded 10 per cent stake in the Lower Zakhum off shore oilfield in February this year. This is the first upstream investment by Indian companies in the UAE.

Almost simultaneously, it was agreed between Indian Strategic Petroleum Reserve Limited and Abu Dhabi National Oil Company (Adnoc) that the UAE energy company will fill 5.86 million barrels of crude in one of the strategic petroleum reserve caverns in Mangalore. “This two-way investment of over $1 billion marks a new phase in our energy ties which have hitherto been largely a buyer-seller relationship. I can confidently say that our energy ties now match the deep, strategic and growing relations envisioned by our two leaders.”

“After investing in the upstream sector in February this year, Indian companies have been engaged in exploring opportunities for investment in the downstream sector.”

Adnoc, on the other hand has been in regular discussions with Indian downstream companies to examine the potential of investing in both the refining and petrochemical sectors in India, he added. “With rapid growth of Indian economy, and consequent rise in consumption, our downstream sector is set to expand. Several greenfield and brown field projects are in the pipeline. In this process we encourage FDI, particularly from trusted and strategic partners like Adnoc and other UAE companies.”