Yemisi Izuora
The International Energy Agency (IEA) has expressed fear that the crashing oil price in the international market could possibly lead to oil-security surprises in the future.
The agency said already, Chevron Corporation and BP Plc are cancelling more than $100 billion in investments.
Meanwhile, India considers crude oil selling at $45 to $50 a barrel is enough to encourage its own exploration without squeezing fuel consumers.
While the collapse in prices has created a buyers’ market and boosted India’s bargaining power amid an oversupply, low crude is “challenging” for the nation’s own oil fields, the country’s oil minister Dharmendra Pradhan said in an interview in New Delhi.
The government’s priority is to protect the interest of consumers and simultaneously attract investments in domestic production activity, he said.
“Pricing affects the Indian market in both ways, because India meets 30 percent of its own capacity from its own oilfields,” Pradhan said.
“Around $45-$50 is a very reasonable price where the exploration and production activities will not be affected and also will not pinch the common consumers in India.”
Oil is trading near $40 a barrel, more than 50 percent lower from 2014 levels, after the U.S. shale boom led to a global glut that was exacerbated by OPEC’s strategy to maintain production and defend market share.
While the rout has reduced fuel prices in emerging economies such as India, it’s also driven companies from Chevron Corp. to BP Plc to cancel more than $100 billion in investments that the International Energy Agency says increases the possibility of oil-security surprises in the future.
Meanwhile, India is replacing China as the center of the world’s oil demand growth as its economy expands faster than any other major country and a growing middle class has more money to spend.
The nation’s consumption grew by 300,000 barrels a day last year, double the average rate in the previous decade, according to a report by The Oxford Institute for Energy Studies this month.
India’s economy is estimated to grow 7.6 percent in the year ending this month, the highest among emerging markets.
The Paris-based IEA estimates it will consume 4.2 million barrels a day of oil this year, surpassing Japan’s 4.1 million barrels.
The South Asian nation briefly overtook Japan as the world’s third-biggest oil consumer in the second quarter of last year.
Energy Investments
“We want to be self-sufficient and our Prime Minister has given us a target to reduce our oil-import dependency by 10 percent by 2022,” Pradhan said.
“For more exploration activities, companies should get a reasonable price.”
India total domestic crude production in the 11 months from April 2015 to February this year was at about 30 million metric tons, the oil ministry’s Petroleum Planning and Analysis Cell said in a report last month.
The nation depends on imports for more than 75 percent of its requirements.
Earlier in March, India announced steps to attract investment in the nation’s energy industry to help meet the goal of cutting dependence on imports.
The measures will help unlock stranded resources worth $40 billion, Pradhan said.