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Asian giants can create a new energy order Published on April 01, 2006 China and India seem to be moving towards bilateral cooperation and coordination in the field of energy. There have been several indications in recent months that they are willing to come together and work out joint actions. To many observers, this is a foundation stone on which an Asian oil and gas order can be established, given the two countries� economic influence and power, not to mention their emergence in recent years as major Asian consumers and buyers of crude.
Both Asian giants must have been motivated by the rising international price of oil and domestic shortages coupled with high requirements of a growing economy. But the Indians are also motivated by their realization that the Sino-Indian competition in acquiring oil and gas assets abroad has always served the interests of a third party.
The initial initiative came from India, which recently hosted a meeting of Asia�s oil producers (Russia, Uzbekistan, Kazakhstan, Azerbaijan, and Turkey) and principal consumer nations (India, China, Japan, and South Korea). According to Indian officials, it is the time to collectively do something aimed at gaining energy security for Asia, especially now that the region is no longer a secondary energy-consumer.
Asia is today a major oil consumption centre. It currently consumes more than 40 per cent of the world total. While the increase in global oil consumption in 2004 was slightly more than 3 per cent, Asian consumption increased by more than 5 per cent. Among the Asian nations, China is the largest consumer and importer. It imports nearly a third of its oil supplies, accounting for 7 per cent of the world demand or 5.5 million barrels a day. In the case of India, it imports nearly 60 per cent of its oil needs or about 2 million barrels a day.
New Delhi�s proposal includes the building of a pan-Asian oil and gas grid through joint investment in exploration, production, transportation, shipping, and the setting up of refineries and gas-processing plants, power-generation stations, and petrochemical units. The proposal is strongly backed by Japan and South Korea, Asia�s second and fourth-largest oil consumers respectively. To the South Koreans, however, it is very important to begin with a plan aimed at linking all oil and gas points in Asia. This constitutes a big challenge, given the impact of political differences on the process of building and developing cross-Asia pipelines, something that has kept trade in oil within Asia marginal.
Some analysts believe that cooperation between the two Asian giants, which is essential for any pan-Asian energy order, is difficult, given their ongoing sharp competition over overseas energy assets. They add that China may not be interested in such cooperation because it is in a better position than India. China�s proven oil reserves stand at 18 billion barrels, compared to only 5 billion barrels in the case of India. It has invested $40 billion in overseas exploration since 2000, while India�s overseas investment has not reached beyond $ 3.5 billion. Additionally, in most cases of the takeovers of foreign oil firms or the exploration deals, the Chinese have either outbid the Indians or been the concession leader.
Other analysts, however, say the two countries can do both; compete with each other in some cases and cooperate in the form of joint bidding in others. In fact, this is the opinion expressed by both Chinese and Indian officials. In this context, one must recall that the Sino-Indian competition over oil and gas fields in Angola, Kazakhstan, Ecuador, Nigeria, Iran, Myanmar, and elsewhere did not prevent the two countries from coming together to jointly exploit Sudan�s oil and gas resources.
China may
be more concerned about cooperating rather than competing with India now that
it is seriously thinking of an alternative route for its oil supplies from the
Middle East. Currently these supplies come through the Malacca Strait, which
experiences 40 per cent of the world�s piracy and massive jamming of tankers.
The alternative is receiving crude from Arabia through the Andaman Sea to
Burmese ports and then by road into Chinese territory. This, of course, needs
India�s cooperation, without which China�s oil imports may be threatened. |
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