India -- tired of losing bids for oil assets around the world to China -- is turning to a more aggressive, state-backed approach. One wonders, however, if it's a bit late in the game.
As Bloomberg's Rakteem Katakey and John Duce write, China's national oil companies outbid Indian firms in some $12.5 billion worth of contracts over the last year. The bidding rivalry -- and China's superiority in it -- goes back as far as 2005, when for example China National Petroleum Corp. twice beat out India's state-run Oil and Natural Gas Corp., acquiring the lucrative oil assets of PetroKazakhstan and Calgary-based EnCana Corp.'s oil and pipeline assets in Ecuador. That has stymied India's efforts to satisfy projected demand that, according to the International Energy Agency, will double to 6 billion barrels a year in oil-equivalent energy by 2030. The two Asian giants are not in a death grip -- each is pursuing its own interests. But there's clearly tension, at least on the Indian side.
New Delhi is fighting back. This year, Oil Minister Murli Deora (above right, with Hugo Chávez) has launched a worldwide charm offensive, traveling to Nigeria, Saudi Arabia, Uganda, and Venezuela in order to chat up local oil ministers and their staffs. The national oil firms, ONGC and Oil India Ltd., have been authorized to spend up to $1.1 billion on investment or acquisitions without government approval.
The most decisive action may be the creation of a sovereign wealth fund to back overseas energy investments. In March, the oil ministry proposed such a fund, to draw on India's foreign currency reserves, and last week the government advanced the idea by forming a task force to draw up a more specific plan.
Yet the still-unnamed sovereign wealth fund comes long after China -- as well as the petrostates of the Middle East -- launched their own such vehicles. Beijing already has a $300 million energy sovereign wealth fund, earmarked out of $2.4 trillion in total foreign currency reserves; India's total foreign currency reserves, by comparison, are $277 billion. That is quite a bit of money in India's paws, but you get the picture -- the country could still face trouble in the bidding process.
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Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.