India, China plan oil buyers’ block to counter Opec

The two countries, which together accounted for 17 per cent of world oil consumption last year, are working on a block that would challenge Opec’s ability to manipulate crude prices in a way that plays havoc with economies of oil importing countries.

The two sides kicked off formal talks in Beijing on Monday for forming an oil buyers’ club, a development that is likely to weigh on Opec ministers, who are meeting to discuss an end to production cuts later this month.

The talks come less than two months after India’s oil minister Dharmendra Pradhan proposed an alliance of Indian and Chinese state-run oil companies for a greater say in the market.

India and China compete for oil assets and Pradhan acknowledged there would be “fair competition in some areas as it happens in business”, but, he said, as consumers the interests of both countries are similar.

“As consumers, we have certain mutual interests. We agreed to promote (business-to-business) cooperation… and we are hopeful that in future buyers will be able to dictate prices,” oil minister Dharmendra Pradhan said after meeting China National Petroleum Corporation chairman Wang Yilin and Li Fanrong, deputy administrator of China’s National Energy Administration, on the sidelines of the 16th International Energy Forum ministerial round in April.

Oil ministry officials say the time is also apt as the countries can now leverage on a boom in US oil and gas production that has in part helped to keep Opec oil prices in check.

Oil ministry officials also said that with firm oil prices, a rising import bill, $450 billion of external debt, including oil-related debt, govternment’s hands are tied and there is no scope for fuel price reduction.

International Energy Agency (IEA) sees India and China fuelling half of global demand growth in the next five years, with India driving incremental demand growth through the next two decades.