China's CNPC approaches ONGC to access India’s oil and gas assets
China’s CNPC, has approached state-run ONGC to forge a comprehensive agreement that could provide it access to India’s oil and gas assets, two officials with direct knowledge of the matter said.
“The government is considering the proposal, but will proceed with caution,” a government official said, requesting anonymity. CNPC executives are expected to visit India by February to negotiate the deal, the official added.
India, which allows 100% FDI in the oil and gas business, is extremely cautious about China’s entry in certain sensitive sectors such as energy, ports and telecommunications.
Officials say Chinese Premier Wen Jiabao’s India visit this month has strengthened Sino-Indian ties and could help in getting clearances for co-operation in the oil and gas sector.
If the government gives its go-ahead, CNPC and ONGC could collaborate in several ventures in the country. According to experts, CNPC sees opportunities in India’s emerging energy sector. Besides exploration & production, it is eyeing domestic engineering and oil-field service opportunities, they said.
The US Energy Information Administration (EIA) estimates India’s proven oil reserves at about 5.6 billion barrels in January 2010, second largest in the Asia-Pacific region after China.
China, the world’s second-largest energy consumer after the US, is aggressively looking for oil and gas assets abroad as its largest oil fields are mature and production from them is on the decline.
ONGC’s collaboration with cash-rich CNPC will help the state-run explorer finance major projects besides sourcing ultra-deepwater technology. The partnership will also help ONGC in acquiring cheaper oil and gas assets overseas by reducing stiff competition from CNPC and its arm PetroChina, the world’s most valuable oil company.
So far, Chinese firms have joint ventures with ONGC’s overseas arm, ONGC Videsh, in foreign countries only such as Syria and Colombia.
In 2005, CNPC and OVL jointly bought a 38% stake in Syria’s Al-Furat Petroleum Company that owns 39 oil and gas fields. OVL jointly owns oil and gas fields in Colombia with public-listed integrated Chinese energy and petrochemical firm Sinopec Corp.
“Chinese companies are smart and have deep pockets. We have had no problems with them in any of our ventures,” said an OVL executive who did not wish to be named.