For years, Beijing has used diplomacy to secure energy supplies, opening the way for its state-owned companies. Now New Delhi wants to do the game.

Hong Kong (AsiaNews/Agencies) – India, the third largest emerging economy in the world, is developing a new energy strategy against Chinese competition. This comes after it lost out to China for at least US$ 12.5 billion in contracts in the past year.

Indian Oil Minister Murli Deora travelled to Nigeria, Angola, Uganda, Sudan, Saudi Arabia and Venezuela this year, leading a record number of delegations to get oil for India’s 1.2 billion people.

India’s energy use is expected to more than double by 2030 to the equivalent of 833 million metric tonnes of oil from 2007, whilst China’s demand may rise 87 per cent to 2.4 billion tonnes, the Paris-based International Energy Agency said.

India so far has faced an uneven contest to close the gap with China, which can dip into US$ 2.4 trillion of foreign currency reserves to buy stakes in oil and natural gas fields from Iraq to Uganda, compared with India’s US$ 250 billion in foreign exchange reserves.

State-owned Chinese companies spent a record US$ 32 billion last year alone acquiring energy and resources assets overseas.

Beijing’s 19 June decision to allow the yuan to appreciate will further strengthen the hand of Chinese companies buying overseas.

Against this, India’s oil import bill has climbed six-fold in the past decade to US$ 85.47 billion for the year ending in March.

Economists note that New Delhi has lost out to its main rival because it has treated the matter as essentially economic, leaving the job to its oil companies. Yet, oil is highly political.

China has virtually taken over Africa through promises of aid, investment and loans in exchange for energy supplies, in a continent that produces one eighth of the world’s crude oil.

State-owned China National Petroleum Corp beat India on major lucrative contracts coming after but with a bigger offer. In August 2005, it agreed to pay US$ 4.18 billion for PetroKazakhstan Inc., then China’s biggest overseas oil deal. A month later China National Petroleum again outbid India’s Oil & Natural Gas Corp (ONGC) in buying assets of EnCana Corp in Ecuador for US$ 1.42 billion.

However, New Delhi is learning. ONGC agreed in 2005 to spend as much as US$ 6 billion on roads, ports, railway lines and power plants in Nigeria in exchange for 600,000 barrels a day of oil for 25 years.

Last February, Indian Oil Minister Deora persuaded Saudi Arabia to double crude shipments to India, to about 800,000 barrels a day.

ONGC and other state-controlled Indian oil companies were part of a group in March that agreed to develop reserves in Venezuela’s Carabobo blocks during a visit by Deora.

“One of the advantages the big Chinese oil companies have is government support,” Gideon Lo, a Hong Kong-based energy analyst, told Bloomberg. “It’s an open secret” that the “government establishes high-level contacts with oil-producing countries. Once this is done, the oil companies can come in and negotiate.”

PetroChina Co., which vies with Exxon Mobil Corp. as the world’s biggest company by market value, wants 50 per cent of its oil to come from overseas by 2020, Chairman Jiang Jiemin said in March. Less than 10 per cent comes from abroad now.

“The financial firepower that the Chinese companies have is a factor,” Tom Deegan, Hong Kong-based head of energy and infrastructure at lawyers Simmons & Simmons, said. “They have access to capital and finance through Chinese banks which have the liquidity, which perhaps Indian companies don’t.” Chinese state-owned companies can indeed afford losses because of government support.

Sinopec bought Addax Petroleum Corp last year for US$ 7.9 billion, gaining licenses in Nigeria, Gabon and Cameroon.

For now, India’s pockets do not appear to be as deep as China’s but it is well gearing up to use its political influence to get what it wants.

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