India and China, which together accounted for almost 17% of world oil consumption last year, are working on combining their shopping carts with a view to challenging OPEC’s capability to play havoc with crude prices and seek better bargains from the cartel of oil exporting countries.
The two sides kicked off formal talks in Beijing on Monday for forming an ‘Oil Buyers Club’. The development is likely to weigh on OPEC energy ministers, who are expected to discuss a plan to end the production cut deal later this month.
The talks come within less than two months of oil minister Dharmendra Pradhan proposing an alliance between Indian and Chinese state run oil companies for a greater say in the market.
The two countries are looking at working together rather than competing. “The boom in US oil and gas production gives us greater leverage against OPEC” an official said.
Move comes as oil market shifts to Asia :-
“As consumers, we have certain mutual interests. We agreed to promote (business-tobusiness) 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.
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.
The ongoing India-China talks are a throwback to 2005, when the then Indian oil minister, Mani Shankar Aiyar, proposed forging a common front on oil to China’s National Development and Reforms Commission vice-chairman Zhang Xiaoqing on the sidelines of the Asian Round Table – a buyer-seller meet. This time, the move comes as the global oil market’s centre of gravity shifts to Asia.
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.