Oil index may be skewed

West asian nations may want india to share crude oil for trading

Petroleum Minister Mani Shankar Aiyar's proposal for an Asian crude oil index may not be in India's interests.

India, along with China and Japan "" the two biggest consumers of oil after the US "" will meet producers from West Asia on January 6 to discuss the possibility of setting up the index.

The index has been conceptualised on the lines of the West Texas Index for the US market, Brent for Europe and Dubai for West Asia.

Industry players say merely the presence of large consumers will not suffice for an Asian index.

They say India and the other major players will have to offer something in the market if they want a pan-Asian index. Countries in West Asia, accounting for 63 per cent of the world's proven oil reserves, would want India to release crude oil from Mumbai High for trading, said an oil company executive.

Mumbai offshore, which includes Mumbai High, accounts for 53 per cent of India's total crude oil production. "Our refineries have been designed to handle crude oil from Mumbai High, which is sweet. We cannot allow it to be sold to other countries," said an executive.

Some experts feel the index be for oil products instead of crude oil since the country has excess refining capacity. Indian refineries have a processing capacity of 127.37 million tonnes per annum (mtpa) against a consumption of 107.8 mtpa. The rest is exported and can be traded along with the production from capacity additions by refineries.

Oil and Natural Gas Corporation, which operates Mumbai High, North and South, plans to invest Rs 10,000 crore for the development of the oilfield. It is pumping in Rs 12,097 crore in 15 identified fields that are expected to produce an a further 120 million tonnes of crude oil up to 2030, half of which will be from Mumbai High.

The government, despite enhanced production from new fields being explored by private companies under the new exploration and licensing policy, does not expect crude oil output to increase significantly. Domestic crude oil production is estimated to hover at around 33 mt to 34 mt a year during the Tenth Plan period (2002-07).

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Going nowhere

Why an Asian oil index will not work for India

Bombay High accounts for 53 per cent of India's crude oil output and the produce is sweet

West Asian producers will want India to release the Bombay High crude for trading. India is expected to object to this

Experts feel India should propose an index for oil products instead, since the country has excess refining capacity