"India, China race to lop up oil reserves"
economictimes.indiatimes.com
ANTO T JOSEPH
TIMES NEWS NETWORK [TUESDAY, FEBRUARY 08, 2005 01:31:47 AM]
MUMBAI: India and China, two growing giants in the region, are vying with each other to snap up oil reserves from various countries.
The aim is to ensure uninterrupted supply and, in the process, pre-empt wide price fluctuations. Both governments are stepping up diplomatic efforts to ensure their immediate energy security.
The Indian government has given a mandate to the state-owned Oil and Natural Gas Corp (ONGC), IndianOil Corp (IOC) and Gas Authority of India (GAIL) to go abroad and buy equity oil to safeguard oil supplies.
As a result, chartering of ships and transportation of crude are undergoing a sea-change with most of the charterers opting for long-hauls and very large crude carriers (VLCCs) for achieving economies of scale.
The shifting of oil sourcing from the traditional markets to diverse sources across the globe is expected to help the shipping companies.
For instance, ONGC, through its foreign exploration and production arm ONGC Videsh (OVL), has now stepped up efforts to strike a deal with Russia, and is negotiating a $6-billion debt-cum-equity deal with Russia’s state-owned oil company Rosneft to acquire equity in embattled Yukos’ core asset Yuganskneftegaz.
OVL is reportedly pitted against China’s largest oil producer China National Petroleum Corp (CNPC), which has also offered to fund Rosneft’s purchase of Yuganskneftegaz.
While China wants to secure oil supplies through the loan, India is planning to pick up equity.
The last few months have seen a series of deals being inked by OVL. At the end of 2004, it acquired US-based Vanco Energy’s 30% stake in an exploration block off the Ivory Coast, West Africa.
Another recent acquisition includes buying a 55% stake in an offshore oil block in Australia.
The company acquired the stake from a Canadian firm, Antrim Energy, which will continue to retain a 32.5% interest and remain the operator of the block.
While OVL is not paying any money for the acquisition, it will finance roughly 80% of the drilling cost, which is estimated to be roughly $9 million.
The foray by Indian oil companies has led all leading domestic shipping majors — Shipping Corporation of India (SCI), GE Shipping, Essar Shipping and Mercator Lines, to buy VLCCs.
“SCI, whose second VLCC is currently being built in South Korea for delivery in October, is now planning to place orders for two more VLCCs,” said an industry official.
OVL has already bought into many developing oil fields in Africa, West Asia, Middle East, Australia and Russia. It owns stakes in various oil and gas fields in Sudan, Vietnam and Myanmar, and is now exploring for oil in Syria, Iran, Iraq, Libya and Russia.
OVL’s first producing oil property abroad, the Greater Nile Petroleum Operating Company in Sudan, has begun pumping crude. Tankers bring this crude to Mangalore Refineries and Petrochemicals (MRPL), where it gets processed.
Both IOC and GAIL are now following the footsteps of ONGC. IOC is currently busy finalising a deal to acquire a controlling stake in three Nigerian oil refineries. It has also decided to invest over $1 billion in an LNG and petrochemical complex in Iran.
On behalf of Indian public sector companies, Transchart, a chartering arm of ministry of shipping, charters tankers to import around 55 million tonnes of liquid cargo.
Another 30-odd million tonnes were imported by Reliance Industries. According to Tranchart, 227 foreign flag ships transported 35 million tonnes while 346 Indian flag vessels moved the remaining 20 million tonnes.
India produces 32 million tonnes of crude oil but its annual requirement is in excess of 110 million tonnes, say shipping analysts.
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