Who wins the India-China race is a question that will be up in the air for some time; but in energy security, China has stolen a head start. The gap has widened in the past month, with India suffering setbacks in hydrocarbon projects in Iran, while China keeps vying for assets in West Africa this week.
India’s Oil and Natural Gas Corp. (ONGC) and Hinduja group failed to win a bid for Iran’s South Azadegan oilfield against China National Petroleum Corp. (CNPC) last month. Then, in a matter of a week, Iran cut the same Indian joint venture’s stake in a Persian Gulf gas field by one-third. What is India doing wrong?
Illustration: Jayachandran / Mint
Let’s first face some facts. Petroleum makes up about one-third of India’s import bill: In 2007-08, it cost at least Rs3.4 trillion. However impending the threat of climate change, India isn’t about to wean itself off hydrocarbons anytime soon.
So the government needs to take this seriously, especially since it has been on a losing streak for a while. In August 2005, ONGC lost a bid for PetroKazakhstan to CNPC—the Chinese offered an extravagant 21.1% premium for a stake in the Central Asian oilfields that India couldn’t match. In 2004, another Chinese firm beat ONGC for exploration work in Angola. And despite India’s friendly ties with Myanmar, China has taken the lead there too.
So what should be done? One, the ministry of external affairs should be involved in this quest, too. In Iran’s case, the recent souring of bilateral relations since the US-India nuclear deal could have hurt. Depending on the country, diplomatic efforts require a push or a rethink.
Two, given that ONGC lost PetroKazakhstan on account of sheer financial power, companies may need more cash. This doesn’t mean more off-balance-sheet oil bonds; deregulating oil prices can itself help companies cope with such problems.
Three, there’s a need for a comprehensive national strategy, directed by the petroleum minister. India is still thinking in project-by-project terms, missing out on assets that don’t yield immediate value. Government coordination is also poor: Companies often have to wait for bureaucratic approval to make sizeable investments.
India can smirk all it wants at the wariness China’s acquisitiveness draws. A failed bid for a California oil firm in 2005 and Rio Tinto this year make India look better in contrast. But China’s misfortunes have yet to translate into India’s gains.
What’s more, these misfortunes shouldn’t be the excuse for the lack of requisite political will. Without that, India is sure to be left far behind.
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