OPEC rules out price discount

By Our Special Correspondent

NEW DELHI, MARCH 19. The Organisation of Petroleum Exporting Countries will encourage member-countries to provide oil at concessional prices to developing countries such as India, but has ruled out such facilities on a multilateral basis. The OPEC Secretary- General, Dr. Ali Rodriguez Araque, today said the organisation did not enter into bilateral contracts, and could not provide price discounts to the third world.

Citing the case of Venezuela, which entered into bilateral contracts providing low interest financing on oil supplies to Mexico and the Caribbean countries, he said, ``we will encourage members to enter into such arrangements.''

Dr. Araque, who arrived here a day after the OPEC announced a one million barrels per day cut in production, was urged by the Petroleum Minister, Mr. Ram Naik, to put regional security programmes such as oil storages in place for the developing world. India, hit by the cut in output, might have to raise prices to meet the spurt in world prices as the oil pool deficit is likely to rise to Rs. 12,000 crores this year.

Mr. Naik said the latest production cut suggested that the OPEC intended to keep prices near the upper level of the $25 to $28 price band. ``In our view this level of prices is not affordable by developing countries like India and may lead to an economic slowdown.''

The proposals submitted by Mr. Naik on extension of credit period, price discount and deferred payment facilities at the recent World Energy Conference in Riyadh, could not be accepted, Dr. Araque, said at a press conference after a seminar organised by the Tata Energy Research Institute (TERI) here.

He said it was important for the OPEC to ensure that developing countries were able to purchase sufficient oil for consumption. Otherwise, there would be constraints on the market. ``We have to expand the market,'' he said.

On the latest cut in output, he said the economic slowdown in the U.S. as well as the seasonal decline in demand in the second quarter of the year had led to the expectation that the demand would rise only by 1.3 million barrels a day this year. While the OPEC would supply one million barrels, the balance would come from non-OPEC producers.

Dr. Araque placed much of the blame for soaring oil prices on the oil trading market where the benchmark crudes of West Texas, Brent and Dubai were often quoted much higher than the OPEC basket of crudes. In fact, the difference in prices was often as much as $10 to $12 a barrel. Last year, when prices rose to over $30 a barrel, the OPEC increased production by four million barrels a day, an over-supply of about 1.5 million barrels a day. Yet, prices continued to rise, he said, indicating speculation in the markets.

The OPEC was working on a proposal for a new benchmark crude, in addition to the existing benchmark crudes, and would provide an indicator of the ``physical reality'' of oil availability rather than merely ``trading in paper''. Dr. Araque also highlighted the fact that price increases in countries such as the U.S. were more due to unequal distribution as well as price hikes in products produced in domestic refineries.

The top OPEC official will meet the Petroleum and Power Ministers for talks here, and will also call on the Prime Minister, Mr. Atal Behari Vajpayee. He leaves tomorrow for Mumbai to meet representatives of the Indian Oil Corporation and Reliance Petroleum. He will then go on to Bangalore for presentations by Infosys and Tata Consultancy Services, as well as meeting the Karnataka Chief Minister, Mr. S. M. Krishna.

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