With oil producers' cartel OPEC playing havoc with prices, India discussed with China the possibility of forming an 'oil buyers club' that can negotiate better terms with sellers as well as getting more US crude oil to Asia to cut dominance of the oil block.
As a follow up of Oil Minister Dharmendra Pradhan's idea floated at the International Energy Forum (IEF) meeting here in April, Indian Oil Corp (IOC) Chairman Sanjiv Singh travelled to Beijing this month to meet Wang Yilin, Chairman of China National Petroleum Corp (CNPC), a top source said.
On discussion table was debottlenecking infrastructure to facilitate more US crude oil comes to Asia so as to cut the dominance of Organization of the Petroleum Exporting Countries (OPEC), which supplies about 60 per cent of India's oil needs.
Production cuts by OPEC have led to international oil prices hitting a four year high last month that forced a Rs 3.8 per litre hike in petrol and Rs 3.38 a litre increase in diesel prices. Rates started to cool towards month end and retail prices have been cut thereafter.
In a throwback to 2005 when the then oil minister Mani Shankar Aiyar had proposed an alliance of the oil consuming nations, Pradhan wants to form an oil buyers club with China, Japan and South Korea to take up issues like premium being charged from Asian buyers.
At the IEF meeting, India and China agreed to join hands to have a collective bargaining power against cartelisation of oil producers. Singh's visit was to take this forward with concrete proposals for cooperation, the source said.
So far, India has not been able to bargain better rates from the Gulf-based producers of the oil cartel, OPEC. Instead of getting a discount for bulk purchases, West Asian producers, such as Saudi Arabia, charge a so-called 'Asian Premium' for shipments to Asian buyers, including India and Japan, as opposed to Europe. According to Prof Yoshiki Ogawa of Japan, the Asian Premium annually costs somewhere around USD 5-10 billion for Asian importers.
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The source said possibilities of joint sourcing of oil as well as combined bargaining to bring down Asian premium was discussed. Similar collaboration will be proposed to Japan and Korea as well.
With CNPC or its affiliates selling in the overseas market a large portion of oil produced from fields it owns in third countries, India expressed interest in buying the Chinese firm's equity oil directly, the source said.
India is the world's third-largest oil importer after China and the US. Japan is the fourth largest importer and South Korea is right behind it. The four nations account for over a third of the oil imports in the world.
"Why should biggest consumers pay more. Why should these countries pay more in name of Asian premium," Pradhan had said in April. "All the four major Asian economies should come together. And India will try to create a network for that within the four countries."