While as a consumer India will remain “watchful” of actions like the recent OPEC decision to cut production, the move by the oil cartel to reduce oil production will not deter the country’s plan to move towards its plan of becoming a gas based economy, oil minister Dharmendra Pradhan said on Tuesday.
With LNG prices being linked to crude, the move by OPEC to cut production saw an increase in LNG to their highest level for 2016 in the Singapore market on December 2. This sparked fears that gas prices may face upward pressure as oil rises in the wake of the OPEC decision.
“As a consumer, we have to be watchful as things are emerging,” he told reporters after a session with International Gas Union organised by state-run gas utility GAIL as part of Petrotech 2016.
“We have to move to market mechanism. Currently we have some of it… segments such as CNG, PNG are linked to domestic gas and slightly lower than imported fuel. But as the consumer base expands in line with measures being taken by the government, a gas-based market will develop,” Pradhan said.
However, Pradhan said the expanding market and consumer base in India, abundance of future availability from upcoming sources and long-term contracts will moderate (LNG) prices and ensure affordability.
IGU president David Carroll supported Pradhan’s contention. “There is democratisation of gas trade… decoupling of oil and gas prices. Together with abundance of supplies from new facilities expected to come on stream, there will be downward pressure on gas prices,” he said.
Pradhan said countries that have agreed to cut output by 1.8 million barrels a day account for only 40 per cent of the world production and the remaining 60 per cent outside any quota limits.
“As a country which imports over 75 per cent of its oil needs, we have to be very watchful. We have to wait,” he said.
Pradhan said he had raised with the visiting OPEC Secretary General Mohammad Sanusi Barkindo that the grouping should keep in mind the interests of the consuming nations and not monopolise the market.
“He stated that they will bear in mind the concerns but right now they are only rebalancing the market,” he said.
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