India, China to form joint venture to acquire oil assets

Nov 26, 2006, 9:37 GMT

New Delhi - India and China, fierce competitors in the race for securing global oil and gas supplies, have agreed to form a joint-venture company for the acquisition of hydrocarbon assets in Africa and South America, a media report said Sunday.

The decision to form the company was taken during the visit of the Chinese President Hu Jintao, after a meeting between Murli Deora, India's Petroleum Minister and Ma Kai, Chairman of National Development and Reform Commission, China's top planning agency, the PTI news agency reported.

Hu's four-day visit to India beginning November 20, produced several accords on boosting economic cooperation, but the topic of increased collaboration on securing energy assets did not feature on the official agenda.

However, in an unscheduled meeting, Deora and Ma Kai agreed on the need for the two countries to bid together for energy assets to avoid a price war, PTI reported.

'Both countries have in principle agreed to work out a mechanism to bid jointly for oil and gas properties in Africa and Latin America,' the news agency quoted an unnamed official as saying.

'Indian and Chinese flagship companies will pool resources together to form a special-purpose vehicle or a joint-venture company to scout for assets in third countries,' the source added.

An agreement on this connection would be signed in Beijing next month, when Deora is scheduled to attend a ministerial meeting of oil importing countries in the Chinese capital.

India and China, the world's two fastest-growing economies, have been locked in competition to secure energy assets to fuel their economic expansion. India imports 75 per cent of its oil needs, while China imports 33 per cent of its oil.

New Delhi is keen to avoid the rivalry with Chinese energy firms.

China has been regularly outbidding India, most recently in August when state-run Oil and Natural Gas Corporation lost out on Kazakhstan's third-largest oil producer, Petrokazakhstan, to China National Petroleum Corporation.

A month later, the Chinese company outbid India in buying assets of Ecuador's EnCana Corp. for 1.42 billion dollars.

Energy analysts have said the competition between India and China has only benefitted sellers and teaming up would give both countries more negotiating muscle in securing foreign oil and gas fields.