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India, China plan to pour oil on troubled relationship

India, which lags way behind China in the frenzied global race to secure oil and gas supplies, said last week the Asian giants would sign pacts in November aimed at teaming up to bid for oil and gas projects.

But analysts are doubtful about whether such a partnership between two neighbours with a history of hostility could work.

“It’s a nice idea for India and China to talk cooperation, but they have a mountain to climb as they have no history of cooperation,” said Ng Weng Hoong, editor of Singapore-based industry publication Energy Asia.

“They haven’t been really talking for decades and suddenly they find themselves searching the same parts of a shrinking world for energy. It’s tough to talk intimately when you’re both rushing for the door at the same time.”

India, which initiated the idea, imports nearly 70 per cent of its oil needs while China relies on foreign producers for more than a third of its oil.

Their ever-expanding energy appetites to fuel booming economies have strained world supplies and helped propel oil prices to record highs.

“The logic for India is “if you can’t beat them, join them’,” said Rahul Bedi, New Delhi-based analyst for Janes Defence Weekly. But India would have to accept that “China will be the senior partner,” he said.

China has been regularly outbidding its neighbour, most recently last Monday when India’s state-run Oil and Natural Gas Corp lost out in a offer for Kazakhstan’s third-largest oil producer.

“The first test case (for cooperation) is right before our eyes: PetroKazakhstan,” said Energy Asia’s Ng. “Chinese media has been celebrating the catch... I haven’t see a story or commentary from anyone in Chinese oil circles saying, “Let’s see if we can share this bounty with the Indians’.”

While China and India signed a declaration in April committing themselves to energy cooperation, the Indians have been doing most of the cheerleading.

The head of the Indian oil ministry’s international division, Talmiz Ahmad, told AFP plans for a partnership were still at the ”pioneer stage” but added India hoped the day would come when “we will cooperate more than we compete”.

The two countries’ state-run oil firms would sign preliminary cooperation deals when Petroleum Minister Mani Shankar Aiyar visits Beijing in November, he said.

Ahmad said the countries would focus their attention on four areas -- the Caspian Sea region, Central Asia, Africa and Latin America.

“In the first instance, our companies will engage (with Chinese companies) in an information-sharing dialogue on specific proposals with a view to coming up with possible joint offers,” he said. India imports nearly 70 per cent of its oil needs and last year consumed a little over two million barrels a day that a government paper has forecast will rise to 7.4 billion barrels by 2025.

China’s annual use stood at 5.46 million barrels of oil a day in 2003, a figure seen doubling by 2020.

Teaming up would give Indian and Chinese more negotiating muscle as they buy up far-flung oil and gas fields, analysts say.

“They should figure a strategy to make life more difficult for producers... It might mean China wouldn’t have to spend so much,” David Zweig, head of the Center on China’s Transnational Relations in Hong Kong, said.

However, Ng said he was “pessimistic that they will get much done together... They might do some token projects for cosmetic purposes.”

“Working together in a joint venture... is always challenging,” added Victor Shum, Singapore-based analyst at US energy consultancy Purvin and Gertz. “Here you’re combining different cultures, political systems and both are after some prize assets.”

Analysts also point to a long history of mutual suspicion between the neighbours who fought a bloody border war in 1962 that China is generally acknowledged to have won.

“There’s still a deep undercurrent of mistrust,” said Brahma Chellaney, professor of strategic studies at New Delhi’s Centre for Policy Research.

Ahmad from the oil ministry rejected such skepticism.

“We both share a long common boundary -- both history and geography dictate we will have to work together,” he said.

”The broad message we got (from China) is they’re very anxious to cooperate.”

Energy cooperation is a “natural” outcome of fast-growing trade and increasing political cooperation, he added.