The foundations for an Asian oil
and gas grid By Siddharth
Srivastava
NEW DELHI - Stung by the rising
international price of oil and domestic shortages
coupled with high requirements of a growing
economy, India has revived a plan for an oil and
gas grid for the Asian continent.
The grid
is part of a two-fold strategy by the two top
Asian oil guzzlers, China and India, to ensure
reliable delivery networks and energy security.
The other element involves acquiring stakes in
production and exploration projects for which New
Delhi and Beijing continue to cooperate as well as
compete.
The emphasis on the grid comes in
wake of reports that India and China, the most
aggressive shoppers for oil and gas assets in the
world, are coming together to put in a joint bid.
The China National
Petroleum Corporation (CNPC)
and the Oil & Natural Gas Corporation (ONGC),
two of the most high-profile emerging global oil
companies in the past year, could jointly bid for
Petro-Canada's $1-billion oil and gas fields in
Syria. Both India and China feel the strategic
need to diversify their energy sources from the
current dependence on West Asia.
Asia is
no longer marginal to the global oil and gas
economy, said India's Petroleum Minister Mani
Shankar Aiyar in his inaugural address at the
ministerial round table on cooperation between
North and Central Asian producers in New Delhi
last week.
"The era when our production
was controlled by others is now behind us, the era
when the bulk of consumers lived in other
continents is also over," he said. "Already,
two-thirds of the oil extracted from the bowels of
West Asia and Southeast Asia finds its way to the
markets of Turkey, India, China, Korea, Japan and
other consumption centers in Asia."
The
round table, the second being hosted by India, has
brought together oil-producing countries including
Russia, Turkey, Uzbekistan, Kazakhstan and
Azerbaijan in dialogue with the principal Asian
consumer nations - China, Japan, Korea and India.
This is not the first time India has raised
such a proposal. At an Asian gas-buyers meeting in
New Delhi in February, Aiyar exhorted assembled
nations, including China and Saudi Arabia, to
build a pan-Asian gas grid and end "the wretched
Western dominance".
Reiterating India's
resolve, he said producers and consumers could
jointly invest in infrastructure to gain energy
security for the region. "We can together invest
in exploration, production, transportation,
shipbuilding and shipping, in ports and terminals.
We can together build refineries and
gas-processing plants and power-generation
stations and petrochemical units; in short, we can
together take on the world. That would be true
energy security."
South Korea, Asia's
fourth-largest oil consumer, has backed India's
efforts to create an Asian oil and gas order by
setting up an inter-state oil and
gas-transportation system.
"Trade in oil
within Asia remains marginal," Korean Minister of
Commerce, Industry and Energy Hee Beem Lee said.
"The work that is urgently needed is a master plan
that links all the points in Asia through what can
be called, the Inter-Asia Oil and Gas
Transportation System.
"To solidify this
effort, I propose that a working group be
established with all the countries in Asia
represented, and its first meeting be held in the
first half of next year in Korea. North and
Central Asia, which includes Russia and the
Caspian Sea region, were increasingly important to
global oil supply. Large oil fields with pipelines
are being developed, and with it Central Asia is
emerging as a major oil resource region. But the
unresolved problem of transporting the oil is
holding back the full potential of oil trade
within Asia."
Meanwhile, Aiyar said a
Japanese proposal to study the possibility of
networking the countries of Central, South and
East Asia and elsewhere as well as an initiative
to promote a sustainable and flexible energy
system (SAFE) were endorsed. It was agreed that
practical steps be taken bilaterally and
regionally, as well as globally, for networking
the knowledge base of participating countries in
the development of the Asian oil and gas sector
and the energy economy in general.
The
importance of mutual cross-investment to reinforce
mutual trade in oil and gas and associated
downstream industry was emphasized as the optimal
means of promoting stability, security and
sustainability in the Asian oil and gas economy,
he said. "It was emphasized that
environment-friendly investment in upstream and
downstream projects should be encouraged."
Asia has emerged as a major oil
consumption center, with current consumption about
40% of the world total of about 82 million barrels
per day. Against the increase in global oil
consumption of about 3.3% in 2004, Asian
consumption increased by more than 5%. Asia is
projected to continue to be the dominant
oil-consuming center in the next 20-25 years.
Beijing imports a third of its oil
supplies, accounting for as much as 7% of the
world demand at 5.46 million barrels a day. India,
on the other hand, imports as much as two-thirds
of its oil needs, consuming about 2 million
barrels a day.
According to estimates, if
the Indian economy maintains its robust growth, by
2025 it could be consuming 7.4 million barrels a
day. Indian Prime Minister Manmohan Singh has
stated that emphasis on energy security is second
only to food security for the country. New Delhi
has also been zealously pursuing its bid to access
international civilian nuclear-energy technology,
post the far-reaching pact signed with US in July.
China, India as partners? Indeed, hopes of pan-Asian cooperation have
resulted in New Delhi and Beijing trying to work
out matters instead of engaging in a cutthroat
competition for energy resources that jacks up bid
prices. Beijing is still quite stung by its
experience in the US earlier this year when CNOOC
(China National Offshore Oil Corporation), China's
third-largest oil producer, withdrew its bid for
Unocal's energy assets, citing political
opposition in the United States.
In
January, India hosted the first-ever meeting of
oil ministers from the major Asian oil importers
and Middle Eastern exporters. The conference
supported India's call for an Asian oil market.
The next month the Third Asia Gas Buyers' Summit
was held in New Delhi. India and China are
partners in Sudan.
Both China and India
have used these forums to work out joint actions.
China's oil delegation leader stated: "We [China
and India] have agreed not to compete with each
other ... We will be coordinating and cooperating
with India and possibly joint bidding on a
case-by-case basis."
"India and China
don't have to go through fratricide in order to
arrive at the conclusion that it is better to
cooperate on energy security," Aiyar said. "Of
course there will be competition where the market
dictates."
The competition is stiff and
analysts continue to predict that cooperation will
be difficult. In its ongoing quest to boost its
overseas energy reserves, India's giant public
sector ONGC is bidding for a stake in a Nigerian
offshore field with an estimated value of $1
billion.
The stake in the undeveloped Akpo
oil and gas field was put up for sale earlier this
year by the Nigerian firm, South Atlantic
Petroleum Ltd. The bid is a new push by ONGC after
being beaten by Chinese firms in the takeovers of
the $4.2 billion PetroKazakh and the $1.4 billion
Ecuador oil field sale by North American producer
EnCana.
China in October outbid ONGC in an
exploration deal in Angola. China holds a 50%
share in Iran's Yadavaran field, while India holds
a 20% share. In a Sudanese producing field, CNPC
is the concession leader while ONGC holds a
one-fifth share. China has also snapped up
exploration blocks in Myanmar.
Commenting
on the possible first joint bid in Syria, Gavin
Thompson, China manager for Wood Mackenzie
research and consulting has said: "This would be
something one-off. It does not represent a major
strategic partnership. But it is an interesting
development."
However, in keeping with the
spirit of trying to work together, India and China
are likely to sign an "overarching agreement" on
cooperation in the oil and gas sector during a
visit by Aiyar to Beijing expected in mid-January.
"Around four to five memorandums of
understanding are expected to be signed. The talks
with Chinese representatives during various
meetings this year have indicated that cooperative
relations are not only possible but desired by the
Chinese companies," he said following sessions
last week with a team led by Chinese ambassador
Sun Yuxi.
"We are proposing an overarching
agreement that would set out aims and objectives,
including institutional mechanisms to carry
forward the cooperation, including in research and
development," Aiyar said. While China has
suggested its National Development and Reform
Commission (NDRC) as an umbrella body to
facilitate long-term cooperation, India has been
asked to identify a similar institution.
He also indicated that Syria could be one
of the countries India could tie up with China to
jointly bid for exploration blocks for the first
time.
Siddharth Srivastava is a
New Delhi-based journalist.
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2005 Asia Times Online Ltd. All rights reserved.
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