China, India seek cooperation in global oil quest

Beijing, April 3: Chinese Premier Wen Jiabao visits India this week with the race between the world's two most populous nations to secure the energy they need to fuel their growing economies likely to be on the agenda.

In volatile trouble spots from Sudan to Myanmar, both countries are competing to snap up resources where most Western companies cannot, or dare not, compete, as well as facing off in less difficult environments.

But politicians, including India's oil minister, have started talking of energy co-operation as political relations, marred by a 1962 border war, warm.

With rapidly growing oil demand, and increasing dependence on imports -- last year over 40 per cent of China's crude and some 70 per cent of India's came from abroad -- the two countries have more than just their rivalry in common.

And they are linked by similar business models, with cash-rich, state-controlled oil firms seen having more appetite for risk than companies beholden to earnings-conscious shareholders.

"Although there is competition, both sides share a common aim," said Zhou Fengqi, a high-level adviser in the Energy Research Institute of China's powerful National Development and Reform Commission.

"There is a basis for cooperation between the two sides, because they are both developing countries with oil demand ... but the specifics of any cooperation still needs to be researched".


A deal could include agreements for each country to refrain from trying to buy certain assets to prevent bidding wars, or working on joint projects in areas of interest, analysts say.

"We are always pitted against each other to the advantage almost always of the third country," Indian Oil Minister Mani Shankar Aiyar said in February.

But the energetic politician is wary of his neighbour as well as welcoming, advocating restructuring Indian state firms to help them compete with Chinese rivals.

And although Chinese and Indian companies are partners in Sudan's Greater Nile Project, widespread cooperation could be a long way off with both countries on a global prowl for assets.

"The Chinese in particular, I think, would be reluctant to start excluding themselves from areas of certain countries just so they could avoid having Indians bidding on one or two assets," said Gavin Thompson, Beijing-based analyst with Wood Mackenzie.

"Its just a little bit too competitive for that to happen".

India's ONGC, which has stakes in oil and gas projects in countries including Russia, Libya and Australia, plans to spend $2 billion this year on overseas acquisitions.

Chinese state oil giant CNPC, parent of New York- and Hong Kong-listed PetroChina, has invested billions of dollars in projects around the world, including Indonesia, Azerbaijan, Syria, Algeria, Ecuador, Peru, Chad and Kazakhstan.

If China and India can't cooperate over oil and gas deposits there may still be a future for lower-level cooperation.

"Both countries have large populations without access to modern forms of energy and we need to work together developing technologies appropriate for rural areas," said R. K. Pachauri, Director General of the Energy and Resources Institute in New Delhi.

Cleaner coal-burning techniques offers another opportunity for cooperation, but neither side has rushed to promote this kind of deal amid the jostling about overseas oil resources, he said.

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