India, China work out new energy
synergies By Siddharth
Srivastava
NEW DELHI - Have India and
China worked out new synergies in acquiring
overseas energy assets? The fruits of such
teamwork seem to be increasing.
China
Petrochemical Corp, better known as Sinopec Group,
is reported to be close to signing a deal with
Iran to develop the Yadavaran oilfield in the
southern area of the Middle Eastern country.
Sinopec will secure a 51% stake in Yadavaran, with
India's state-owned Oil and
Natural Gas Corp (ONGC) taking a 29% interest.
A deal would not only grant China access
to a field with estimated reserves of more than 30
billion barrels of oil, but also represent the
latest alliance between Sinopec and ONGC. India
had an understanding with the Iranians that once
the terms for acquisition with the Chinese company
were finalized, a 29% stake would come to it on
the same conditions.
Last month, the two
companies teamed up to invest US$850 million to
buy a 50% stake in Omimex de Colombia Ltd, which
has oil-and-gas-producing assets in the South
American country and is owned by US-based Omimex
Resources Inc. The two Asian firms have formed a
joint-venture company, Mansorovar Energy Colombia
Ltd. This is the first acquisition made jointly by
ONGC's overseas arm, ONGC Videsh Ltd, with Sinopec
Group, the parent of listed Sinopec Corp.
India's largest refiner, Indian Oil Corp
Ltd, is also in talks with Sinopec about possibly
setting up a company to purchase crude oil
jointly. Talks are on for a joint bid in
Kazakhstan.
In the recent past, New Delhi
and Beijing have worked jointly in Syria and
Sudan. In the first instance of Sino-Indian
cooperation, the two countries won a joint bid in
December 2004 to buy PetroCanada's 37% stake in
Syrian oilfields for $573 million.
In
March this year, the two state-run energy firms
Hindustan Petroleum Corp Ltd and Sinopec Corp
signed a preliminary agreement for projects in
India, China and elsewhere. The two will cooperate
in international trade, exploration and
production, refineries and petrochemicals, and
consultancy services.
In January, a
wide-ranging agreement was signed between India
and China for the hydrocarbon sector. India's
energy giant ONGC and China National Petroleum
Corp signed an initial deal covering exploration
and production, while state-run gas transporter
GAIL (India) Ltd signed a pact with Sinopec, CNOOC
(China National Offshore Oil Corp) and Beijing
Gas.
"Unbridled rivalry between Indian and
Chinese companies for the acquisition of overseas
hydrocarbon assets is to the advantage only of the
seller of the asset and to the disadvantage of
both our countries, irrespective of who eventually
wins the bid,'' said Mani Shankar Aiyar, then
India's petroleum minister, after the cooperation
agreements were signed in January.
Like
China, India is also hoping to build a series of
terminals for the import of liquefied natural gas
(LNG) along its coast, and was in talks with
suppliers from Australia, Oman, Algeria, Nigeria
and Malaysia. The two countries are also looking
at natural gas from Iran, Turkmenistan and
Myanmar.
The Indian government has drawn
up an ambitious plan to garner 60 million tonnes
per annum of equity oil from overseas by 2025 by
empowering public-sector oil companies to enter
the exploration and production business abroad.
India is seeking oil assets in countries such as
Kazakhstan, Iran, Sudan, Vietnam and Ecuador
through ONGC Videsh (OVL). OVL currently has
stakes in 24 oil and gas projects spread across 14
countries, including Russia, Sudan, Vietnam and
Myanmar. China's plans are bigger.
Last
year, an unbridled competition for energy
resources saw China beat India, but also ended up
paying much more. For example, in a bid for
Kazakhstan's third-largest commercial oil producer
in August 2005, China outbid India when Kazakh
authorities allowed Beijing to make an additional
offer ($2 billion development aid).
In
this context, cooperation and joint bids are the
new buzzwords. Brazil, Russia, India and China
have agreed to work together and increase the
number of meetings at multilateral forums, Russian
Foreign Minister Sergei Lavrov said recently. The
countries will also increase cooperation among
their representatives at international
organizations to further mutual interests.
Recently, Indian Finance Minister P
Chidambaram cleared the air on speculation about
several matters related to India's economic
policies and future reforms related to China.
"I lean in favor of investments from
China," said Chidambaram. "Each case must be seen
on its merits, and foreign direct investments
should not be stopped unless there are overriding
security considerations."
The minister's
remarks allayed some of the concern surrounding a
new security-related investment law that could
work against Chinese companies.
"No such
law is being proposed. I have not seen it," he
said when asked whether the National Security
Council was drafting such a law. Beijing has been
unhappy with New Delhi's blocking of Chinese firms
from investing in ports and telecoms.
However, some observers are still
skeptical and believe that any future cooperation
can only be on a case-to-case basis to keep bid
prices down. And when it comes to the critical
question of energy security, nations will go it
alone if they can. There is also a fear that India
will invariably end up being the junior partner in
such joint energy deals and lose out if there is
any dispute.
Indeed, with all the talk of
cooperation with China, the experience has not
been entirely benign. Beijing has always been a
tricky customer and the two countries remain
cutthroat competitors, especially for energy
resources. One example is Myanmar, where China was
secretly dealing with Yangon to access gas, even
as India's petroleum minister Mani Shankar Aiyer
was in Beijing.
With PetroChina
threatening to secure its share of gas from
Myanmar, India is pushing the $3 billion pipeline
through its northeast with the aim of skirting
Bangladesh. GAIL has completed a feasibility
report for laying a 1,400-kilometer pipeline from
the Arakan state capital Sittwe to Gaya, Bihar
state, via Mizoram.
The report paves the
way for India to do a direct deal with Myanmar for
gas. The prospects of a pipeline through
Bangladesh, the cheapest potential option, looked
uncertain as Dhaka refused to sign a three-nation
memorandum of understanding unless it were to
include trade and transit issues with India.
While China has been accommodating to
India in the Shanghai Cooperation Organization,
most agree that it is just some leeway to keep
burgeoning Chinese trade exports to India well
oiled. New Delhi knows that the battle for Central
Asian energy resources will be bitter. Delhi has
been developing independent links with Central
Asian countries, with India's first military base
to be operational in Tajikistan soon.
Some
observers have drawn a parallel between US-China
policy and Beijing's engagement of India.
Washington has looked at China as a potential
rival whose growth momentum cannot be contained
and hence must be engaged in a constructive way
that is good for business.
Beijing seems
to have defined a similar approach toward New
Delhi. Trade between India and China grew to $18.7
billion in 2005, up 37.5% from the previous year,
and is expected to cross $20 billion this year.
Not too long back, annual trade was just $1
billion.
But translating such economic
goodwill into a strategic alliance that will
extend to Beijing backing India on the Indo-US
nuclear pact, support at the Nuclear Suppliers
Group, a seat on the United Nations Security
Council, or keeping away from supporting
Pakistan's military program looks to be some way
off.
New Delhi has always been wary of
China's influence in its immediate neighborhood,
specifically Pakistan. Islamabad recently declared
that if Washington does not cede nuclear know-how
to Pakistan, it will access the same from China.
Beijing has kept quiet on the issue, a reflection
of its keenness to keep Islamabad happy and
counteract US influence through India, if needed.
Siddharth Srivastava is a New
Delhi-based journalist.
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2006 Asia Times Online Ltd. All rights reserved.
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