China and India forge alliance on oil

China and India, the world’s two fastest growing energy consumers, on Thursday set aside long-standing rivalries and agreed to co-operate in securing crude oil resources overseas.

The agreement, aimed at preventing the two nations’ competition for oil assets pushing up prices, symbolises their increasingly assertive role in global energy politics.

In an age of growing energy insecurity “it makes sense for India and China to co-operate [rather] than compete . . . the time of access to easy oil is in the past”, said Jim Steenhagen, managing director at PFC Energy, the US consulting firm.

The agreement came as fears over a serious threat to oil supplies from Iran began to rattle the market yesterday. Prices rose above $65 a barrel on the New York Mercantile Exchange as Tehran’s nuclear ambitions threatened instability at the centre of the world’s main oil-producing region.

The Sino-Indian agreement was signed in Beijing by Mani Shankar Aiyar, India’s petroleum minister, and Ma Kai, the head of the National Reform and Development Commission, China’s chief economic planning and energy ministry.

The agreement comes after India’s Oil and Natural Gas Corp lost out to Chinese rivals in the race to acquire fields in Angola, Nigeria, Kazakhstan and Ecuador.

But a recent joint purchase of a stake in a Syrian oilfield by ONGC and the state-owned China National Petroleum Corp could set a pattern for future deals. Mr Aiyar hailed this as a model.

Oil executives said co-operation between China and India could benefit international energy companies by reducing the ferocity of the bidding.

Under their agreement, Chinese and Indian oil companies will establish a formal procedure to exchange information about a possible bid target, before agreeing to co-operate formally.

Their memorandum of understanding also covers possible co-operation across the energy industry, from exploration to marketing. But India and China’s national oil companies could still compete in third countries.

Sceptics say Chinese companies are unlikely to share their real business plans with Indian rivals, especially as they have mostly been able to outbid them. “Governments like to sign pieces of papChina and India, the world’s two fastest growing energy consumers, on Thursday set aside long-standing rivalries and agreed to co-operate in securing crude oil resources overseas.

The agreement, aimed at preventing the two nations’ competition for oil assets pushing up prices, symbolises their increasingly assertive role in global energy politics.

In an age of growing energy insecurity “it makes sense for India and China to co-operate [rather] than compete . . . the time of access to easy oil is in the past”, said Jim Steenhagen, managing director at PFC Energy, the US consulting firm.

The agreement came as fears over a serious threat to oil supplies from Iran began to rattle the market yesterday. Prices rose above $65 a barrel on the New York Mercantile Exchange as Tehran’s nuclear ambitions threatened instability at the centre of the world’s main oil-producing region.

The Sino-Indian agreement was signed in Beijing by Mani Shankar Aiyar, India’s petroleum minister, and Ma Kai, the head of the National Reform and Development Commission, China’s chief economic planning and energy ministry.

The agreement comes after India’s Oil and Natural Gas Corp lost out to Chinese rivals in the race to acquire fields in Angola, Nigeria, Kazakhstan and Ecuador.

But a recent joint purchase of a stake in a Syrian oilfield by ONGC and the state-owned China National Petroleum Corp could set a pattern for future deals. Mr Aiyar hailed this as a model.

Oil executives said co-operation between China and India could benefit international energy companies by reducing the ferocity of the bidding.

Under their agreement, Chinese and Indian oil companies will establish a formal procedure to exchange information about a possible bid target, before agreeing to co-operate formally.

Their memorandum of understanding also covers possible co-operation across the energy industry, from exploration to marketing. But India and China’s national oil companies could still compete in third countries.

Sceptics say Chinese companies are unlikely to share their real business plans with Indian rivals, especially as they have mostly been able to outbid them. “Governments like to sign pieces of paper, but it often doesn’t amount to much,” one analyst said.

India is more dependent on oil imports than China. Mr Aiyar believes India’s import dependency will increase from 70 per cent of consumption this year to about 85 per cent in 15 years. China imports about half its oil.

Li Zhaoxing, China’s foreign minister, this week started a trip to Africa that will underpin Beijing’s search for energy security.