India, China pin down $573m Syria
deal By Indrajit Basu
KOLKATA - India and China, the most
aggressive shoppers for oil and gas assets in the
world, and normally archrivals in the race for
overseas oilfields, have finally come together to
pursue their energy security in the global arena.
China National Petroleum Corporation
(CNPC) and India's Oil and Natural Gas Corporation
(ONGC), the two largest oil companies in the
respective countries, announced on December 20
that they had jointly won a bid to acquire 37% of
Petro-Canada's stake in
Syrian oilfields for US$573
million. ONGC and CNPC, both state-owned, will
have equal stakes in the al-Furat oil and gas
fields.
"We are very excited about this
breakthrough of joint acquisitions with CNPC,"
said Subir Raha, the chairman of ONGC, who
maintains a very high profile in not only the
country's oil and gas industry but the globally as
well.
"CNPC and ONGC have been working
together as joint operators in Sudan for the last
three years. While we have worked together as
joint operators and have gained confidence in each
other's technical capabilities, we had never
joined hands to own a foreign property jointly.
This [will] be the first time, then, that an
Indian company [will] acquire an oil property
along with a Chinese company."
Indeed, as
experts have said, although in monetary terms a
$573-million deal may not be very significant,
this one is significant because ONGC's overseas
arm ONGC Videsh Ltd (OVL) had competed with
Chinese firms for oil properties in Central Asia,
West Africa and Latin America in the recent past.
In addition, in the past 12 months,
Chinese oil companies have been consistently
outmaneuvering India in just about every oil
property the two countries chased. In their bid
for oil security, the two countries, allege oil
industry analysts, have also contributed immensely
to the record high oil prices this year.
Take the following instances. In early
August, CNPC and an ONGC consortium competed
directly in an attempted buyout of the Canadian
firm PetroKazakhstan, which had most of its
operations in Kazakhstan, but CNPC grabbed the
deal at the last moment by topping the Indian
consortium's bid.
And last October,
despite an agreement between Shell and OVL that
entailed offloading Shell's 50% stake in Angola
Block 18 to OVL, India was stymied because
Sonangol, Angola's national oil company, which is
the sole concessionaire for exploration and
production of oil in Angola, wanted the property
to go to Chinese oil companies.
Currently,
too, the two are also pitched against each other
for Encana's Ecuador assets, which in
mid-September almost went to Andes Petroleum
Corporation, a joint venture of Chinese petroleum
companies, because India withdrew from the bid.
However, subsequently it was reported that ONGC
may be considering bidding for it again.
But besides the mere fact that the two
countries have joined hands for feeding their
oil-hungry economies, the current deal is
important for a few other reasons.
For
one, said experts, the al-Surat fields are already
producing, so the partners will gain instant
access to 60,000 barrels of oil per day without
having to invest in exploration immediately. And
secondly, "it is an important milestone because we
have been working on this for quite some time, and
instead of competing wherever possible, this win
opens up the possibility of the two countries
working together whenever feasible," said S C
Tripathi, the Indian petroleum secretary.
The two countries' pursuit of what India's
Petroleum Minister Mani Shankar Iyer calls
"coopetition instead of competition" in securing
their energy needs started in April this year,
when during his visit to India Chinese premier Wen
Jiabao said that energy cooperation should be an
integral part of the bilateral dialogue between
the two countries.
Picking up on that cue,
an Indian delegation from oil companies visited
China subsequently to discuss energy ventures. The
two countries also set the global oil industry's
tongues wagging when Indian and Chinese oil
companies met up at the World Petroleum Congress
in Johannesburg in South Africa in October. And
last month, representatives from the oil
industries of the two countries met in New Delhi
for further roundtable ministerial talks.
Meanwhile, it appears that the stage is
set for the two countries to make more joint oil
bids. According to a report in the Economic Times,
Indian oil companies, including downstream
marketing companies like the Indian Oil
Corporation, BPCL, OVL and Prize Petroleum, are
set to ink agreements with China's Sinopec, CNOOC
and CNPC, for collaboration in the exploration,
petroleum and gas sectors.
India and China
are also expected to sign a bilateral hydrocarbon
cooperation deal in January 2006, when Iyer is
slated to visit China. It will work as an umbrella
agreement enabling joint ventures between
companies in different sectors. It has also been
reported that three Chinese oil companies have
shown interest in tying up with Indian oil
companies in their global quest for energy.
But this cooperation could be bad news for
Western oil companies. Analysts said that if the
two countries teamed up on a regular basis, it
should worry Western oil majors. "The Indian and
Chinese companies are willing to pay a higher
premium for assets. The pressure is certainly on
the majors," said Praveen Martis, an analyst at
consultancy Wood Mackenzie, in a Reuters report.
Indrajit Basu is a Kolkata-based
equity-analyst-turned-journalist with more than 12
years of experience in business/finance and
technology journalism. Besides writing for Asia
Times Online, he also writes for US-based
publications, as well as IT companies.
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