Govt seeks review of payment terms with oil producers to help check rupee decline
India on Monday requested a review of payment terms with major oil producers as part of the National Democratic Alliance (NDA) government’s strategy to help counter a depreciating rupee.
The pitch was made by Prime Minister Narendra Modi during his meeting with global chief executives and experts from the oil and gas sector.
This comes in the backdrop of a spike in international crude oil prices that has resulted in inflationary pressures at home ahead of a series of state assembly elections and the general election next year.
“Interacting with the global leaders of the energy sector, Prime Minister highlighted the significant positioning of India in the oil and gas market. He noted that the oil market is producer driven; and both the quantity and prices are determined by the oil producing countries,” the government said in a statement and added, “He requested for review of payment terms so as to provide temporary relief to the local currency.”
Increasing tensions between the US and Venezuela, with the US demanding an end to all imports of Iranian oil by early November, and the rupee’s performance as Asia’s worst performing currency, have further compounded the situation and put India, the world’s third-largest oil importer, in a spot.
The meeting was attended by Khalid A. Al-Falih, Saudi Arabia’s energy, industry and mineral resources minister and chairman of world’s biggest oil producer, Saudi Arabian Oil Co. (Saudi Aramco); Sultan Ahmed Al Jaber, minister of state in United Arab Emirates government and the chief executive officer (CEO) of state run-Abu Dhabi National Oil Co. (Adnoc) and BP’s group chief executive officer Bob Dudley.
There were also representatives from Russia’s OAO Rosneft—the world’s largest publicly traded oil firm, Pioneer Natural Resources Company, Abu Dhabi’s Mubadala Development Co., Schlumberger Ltd., Wood Mackenzie, World Bank, International Energy Agency (IEA) among others.
India’s finance minister Arun Jaitley, oil minister Dharmendra Pradhan and federal policy think tank NITI Aayog’s vice-chairman Rajiv Kumar also attended the meeting, that comes at a time when crude oil prices have spiked.
“Though there is enough production, the unique features of marketing in the oil sector have pushed up the oil prices,” the Indian government statement added.
Speaking at the India Energy Forum by CERAWeek, Pradhan said crude prices have gone up 50% in dollar terms and 70% in rupee terms due to global reasons since last year.
While Brent prices had softened on Monday and was trading at $80.41 per barrel, traders worldwide are betting on oil price to cross the $100 mark yet again. International crude oil prices had reached a record high of $147 per barrel in July 2009. The oil producers on their part stated their commitment to meet India’s energy needs.
“Prime Minister Modi today cautioned producers like myself not to kill the hen that lays the golden egg,” said Khalid A. Al-Falih, Saudi Arabia’s energy minister at the India Energy Forum.
“Oil will be easily in the three digits today, had it not been for the extra efforts that the kingdom has done,” Falih argued.
Opec accounts for around 40% of global production. The grouping’s June decision to increase production by around one million barrels per day (bpd) or around 1% of global supply came against the backdrop of calls from the US, China and India to help moderate prices.
“Mr. Modi drew attention of the experts on certain key policy issues relevant to India. Firstly, he highlighted that the consuming countries, due to rising crude oil prices, face many other economic challenges including serious resource crunch. The cooperation of the oil producing countries would be very critical to bridge this gap,” the Indian government statement added.
India, which is reeling under the impact of high oil prices, has also reminded Saudi Arabia of the Organization of the Petroleum Exporting Countries’ (Opec) promise of increasing production by an additional one million barrels per day.
NEW DELHI: