The government has turned to oil diplomacy to secure better fuel supply contracts, a move that industry officials say can cut India's import bill by at least Rs 10,000 crore.

The initiative comes at a time when the members of the Organization of the Petroleum Exporting Countries (OPEC) are battling for market share amid competition from new energy suppliers. Gulf countries too have shown heightened interest in investing in India, particularly after Narendra Modi became the the prime minister.

India depends heavily on term contracts with Middle East countries, which announce a monthly official selling price. Oil industry executives and officials say the country will save about Rs 9,000 crore a year for every $1 reduction in
price.

Recently, Saudi Arabia raised the price for Asian buyers, but cut it for the US, where the shale revolution has lifted oil output to the highest in three decades. India feels that as one of the largest importers from the Middle-east it too is entitled to such concessions.

OPEC heavyweights like Saudi Arabia are fighting to protect their market share, and have resisted calls for a supply cut even after crude prices slumped 30 per cent. Oil Minister Dharmendra Pradhan has recently been to Saudi Arabia, OPEC's biggest supplier. "Price of crude oil is not the only issue. There are several investment proposals as many oil producers have shown interest in India," Pradhan told ET, but did not elaborate saying that these were sensitive negotiations.

State oil firms and top government authorities are also in touch with suppliers in South America, Africa and Russia to explore available options to contract crude oil supplies at more competitive rates. Pradhan's next foreign initiative is a visit to Turkmenistan this week for discussions on the pipeline that will transport natural gas from that country to India via Afghanistan and Pakistan.

Government sources said that traditional crude oil suppliers are lobbying for higher purchases from India, which is in the same league as Japan and China as a major energy importer. The government has also held discussions with Japan on  energy issues. Officials said that Modi's visit to Japan has increased prospects of coordination between major importers of oil and gas.

Oil industry experts said that OPEC is concerned about its share of the global oil supply. Its share has fallen from about 55 per cent three decades ago to about 40 per cent now. In recent weeks, sale of Alaskan crude oil to South Korea, the first cargo from North America to Asia in a decade, has heightened the concern of OPEC members. Indian gas transportation firms Gail India plans to import LNG from the US, while Petronet LNG had earlier signed a contract to import fuel from Australia.

Source:economictimes.indiatimes.com