Dateline Beijing: India and China have taken a major step forward on the energy front

If implemented, the agreement on joint bidding for energy assets in third countries will further reduce the dominance of the United States and Western majors in the oil and gas sector worldwide.

13 January 2005
The Hindu

India, China primed for energy cooperation
Framework established for joint bids, joint exploration for oil and gas

Siddharth Varadarajan

• Overall and company-specific MoUs signed
• Rivalry will be disadvantageous to both countries: Aiyar
• India looking at hydrocarbon assets in over 50 countries

Beijing: India and China took a key step towards enhanced energy cooperation by creating a framework under which their state-owned oil and gas companies can evolve and submit joint bids for acquisition of assets in third countries. If implemented successfully, the framework will not end all competition between Indian and Chinese energy companies overseas. But Indian officials are hopeful that the countries will be able to put behind them the bruising battles for acquisition of oilfields in Kazakhstan, Angola and Nigeria, which benefited only the sellers there.

Under the umbrella of an overall memorandum of understanding signed here on Thursday by Minister for Petroleum and Natural Gas Mani Shankar Aiyar and China's National Development and Reforms Commission Chairman Ma Kai, five company-specific MoUs were also signed to begin the process of operationalising cooperation.

Speaking to reporters, Mr. Aiyar stressed that joint bidding in third countries was only one aspect of what was being envisaged. "This is full-spectrum, full-scope cooperation extending across the entire hydrocarbon chain." Developing domestic sources of gas and oil was a priority for both China and India, which was why equal emphasis would be laid on collaborative efforts in the fields of exploration, exploitation and enhanced oil recovery.

Accordingly, Mr. Aiyar said, India was "ready to extend and receive partnership with China" in upstream exploration and production as well as downstream activities such as refining and petrochemicals, marketing of petro products, transmission and city distribution of gas, laying of national and trans-national energy pipelines as well as in other areas.

The two MoUs Gas Authority of India Limited signed with the China Petrochemical Corporation and the China National Offshore Oil Corporation specifically envisage cooperation in exploration in the two countries and other parts of the world.

Explaining the logic of India and China seeking to place joint bids for overseas oil acquisitions, Mr. Aiyar said unbridled rivalry between Indian and Chinese companies was to the disadvantage of both, regardless of who eventually won the bid. "If there is sufficient exchange of information well in advance and well on time, combined with mutual trust and confidence," there could be many occasions where India and China could work together to their mutual advantage.

Among the MoUs signed was one between ONGC Videsh Ltd and the China National Petroleum Corporation for timely exchange of information. Last month, India and China jointly acquired oil assets in Syria but Mr. Aiyar declined to identify any of the countries where joint bidding might take place in the future.

India is currently looking at hydrocarbon assets in more than 50 countries. "There will still be competition between us [in some places]. This is not a question of working out a theology ... but success [in a joint bid] will feed upon itself."

The Minister denied there was any connection between record high oil prices internationally and the growing Chinese and Indian demand for imported energy. Blaming speculators for the "irrational" price, he said India and China could actually work together to bring about a more rational market for oil in Asia.

Hydrocarbon cooperation between the two countries should be seen in the "larger context" of pan-Asian energy cooperation. By diversifying crude sources through the use of existing and new pipelines, for example, Asian countries might be able to escape the "Asian premium" implicitly levied on Persian Gulf oil sales to the region. The final aim, he said, was to move towards an Asian energy grid. He conceded that "at this stage" such a grid seemed "a fanciful idea" but added that it needed to be fleshed out.

Asked about the possibility of extending the proposed Iran-Pakistan-India pipeline to China, Mr. Aiyar said India needed much more information about the requirements of gas in southwest China and the economics of alternative modes of transhipment before it could really consider moving down that track.

"But this is an issue which we should think about."

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