India & China To Cooperate On Overseas Oil Exploration
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The largest state-owned oil companies in India and China have renewed their pact to jointly explore for oil and natural gas worldwide, reported The Wall Street Journal on Tuesday, after an initial agreement signed by both nations in 2006 had failed to bear any significant results.
The largest state-owned oil companies in India and China have renewed their pact to jointly explore for oil and natural gas worldwide, reported The Wall Street Journal on Tuesday, after an initial agreement signed by both nations in 2006 had failed to bear any significant results.
According to the Times of India, then Indian oil minister Mani Shankar Aiyar had, in 2006, pushed for a slew of MoUs that would cover all segments of the oil industry, including joint bids for third-country projects and sharing information on crude purchases.
Yet tensions between both nations on long-term issues – including the border dispute in the Himalayas, the Chinese support for Pakistan and the sovereignty row in the South China Sea – ensured that the initial pact never fully got off the ground, with India’s current junior oil minister, R.P.N. Singh, admitting that “there has been no sharing of information on crude purchases by the oil companies of the two sides.”
Nonetheless, the new agreement signed by the Oil & Natural Gas Corp (ONGC) of India and China National Petroleum Corp (CNPC), appears to signal a more practical sentiment that has been emanating from the two sides.
[quote]”We think it is better to cooperate than compete,” noted Dinesh Sarraf, managing director of ONGC Videsh Ltd., ONGC’s overseas investment arm.[/quote]The two companies have since been working jointly on projects in Sudan, Syria and Myanmar, with further exploratory activities said to be already on the horizon. Both CNPC and ONGC are also among the companies that have expressed interest in building an oil pipeline from South Sudan to Kenya’s East African coast, which will bypass the traditional export route through the north.
According to Mirae Asset analyst Nipun Sharma the latest agreement could be a boon particularly for ONGC, given that, in recent years, China has been more successful than India in getting oil and gas equity stakes across the globe.
Sharma warned though that the two nations needed to “better align their economic and political interests” before more joint explorations could go ahead smoothly.
“The previous pact only resulted in a handful of projects, including one in Sudan,” said Sharma. “This time around, if the two nations are able to better align their economic and political interests, we could see more joint exploration projects ahead.
[quote]”This would be a definite positive for ONGC, which needs to accelerate its internationalization program in order to increase production and reduce its exposure to domestic oil-pricing risks.”[/quote]Related: China vs. India – Is Either Economy At Risk? : Stephen Roach
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Some analysts have also questioned whether the two parties could come to an agreement over oil exploration in the South China Sea. Recently, China has been warning oil companies, including ONGC Videsh, to stay out of offshore concessions bid out by Vietnam.
Still ONGC chairman Sudhir Vasudeva, however, remains unfazed.
“ONGC drew upon the positive and productive experience of working with CNPC… It is important that henceforth we collaborate with more management engagement on important global assignments beyond the current projects so that the interests of both the companies are mutually served,” he said.
