On Saturday, the Financial Times of London posted several pieces casting doubt on the efficacy of the agreement signed in Beijing by China and India on Jan. 12.  --  "Lex" commented: "The problem with non-aggression pacts is that they implicitly recognize that the signatories do not really trust one another."[1]  --  Another piece noted that India's "growing need for energy has helped improve relations with its neighbors, including Pakistan, its long-time enemy.  --  Among the pipelines in the region now under consideration are ones bringing gas from Iran across Pakistan, one from Turkmenistan across Afghanistan and Pakistan, and even one across India from Iran to China."[2] ...

1.

Lex

SINO-INDIAN ENERGY PACT

Financial Times (UK)
January 14, 2006

http://news.ft.com/cms/s/4bb7870e-84a2-11da-b3f3-0000779e2340.html (subscribers only)

The problem with non-aggression pacts is that they implicitly recognize that the signatories do not really trust one another. That is not all that complicates China's and India's recent agreement to co-operate on, among other things, bidding for energy assets. Hungry for oil and gas to feed their quickly expanding economies, the two countries' respective champions have clashed repeatedly in recent auctions. Co-operation has already brought tangible rewards; a joint bid in December secured Syrian assets from Petro-Canada for $574m, less than the expected $800m-$1bn.

India's more acute import dependence, however, led it to sign a similar agreement with Japan in September -- not usually the best route into Beijing's good books. The Syrian deal was small.

While Sino-Indian relations have improved, their interests are nowhere near as aligned as, say, those of the Western industrialized nations after the oil shocks of the 1970s. Look at how Indian deference to political niceties allowed CNOOC to win a Nigerian auction earlier this month. On a practical level, joint bids in any auction are cumbersome -- particularly once you factor in Indian and Chinese bureaucracy -- and often irk the seller. International oil companies still have reason to fear the more competitive world they find themselves in these days. For them, though, this shotgun wedding presents more a marriage of inconvenience than anything else.

2.

World

Asia-Pacific

CYNICISM GREETS SINO-INDIAN DEAL TO END RIVALRY OVER OIL SUPPLIES
By Carola Hoyos, Anita Jain, Richard McGregor and Khozem Merchant

Financial Times (UK)
January 14, 2006

http://news.ft.com/cms/s/23f50b00-84a3-11da-b3f3-0000779e2340.html (subscribers only)

Asked for a reaction to this week's signing of an agreement between China and India to quell their global rivalry for oil, a Beijing-based businessman chuckled. "A lot of water will flow down the Yangtze and the Ganges before that happens," he said.

It was inevitable that Thursday's announcement by Mani Shankar Aiyar, the Indian petroleum minister, of the signing of a memorandum of understanding on energy co-operation between the world's two fastest growing oil consumers would produce some cynicism.

An Indian initiative, the agreement is designed to provide a mechanism to allow the two countries' oil companies to exchange information before bids for fields in third countries to prevent their competition from inflating prices.

But why, wonder many in the industry, would Beijing want to co-operate with New Delhi, when Chinese oil companies have generally been able to outbid their Indian rivals in head-on competitions around the world?

"It may be possible, but it is highly improbable and even less practical," said James Brock, a Beijing-based energy consultant.

Some argue that Mr. Aiyar's enthusiasm for the scheme betrays an idealism verging on counterproductive meddling.

Subir Raha, chairman of Oil & Natural Gas Corporation, a state-owned energy group, recently lashed out at Mr. Aiyar for not knowing the difference between a publicly listed company with shareholder obligations and a government department.

"It is one of these agreements that governments sign. But when it comes to the hard practice they don't help each other," said Leo Drollas, chief economist at the Center for Global Energy Studies, the London-based consulting firm.

Buying into foreign oilfields to guarantee oil supply does not work. "The holy grail of supply security is just that. It is very difficult to guarantee supplies by buying into oilfields that are ultimately controlled by other governments," he said.

The only way to secure oil in a fungible market is to pay the highest price for a cargo, rather than for a share of a foreign field that can easily slip from one's control due to political unrest or nationalization. This is an almost inevitable eventuality if world oil supply became critically short, analysts warn.

The U.S. State Department nicknamed its policy of energy security "hydrocarbons for all." One White House adviser pointed out that the only way to increase anyone's energy security was to increase everyone's by finding and producing more oil from as diverse a geographic area as possible.

In that sense China and India are helping energy security, if not the international political aims of the U.S. and some European countries, by investing in no-go areas such as Sudan and Burma.

Rather than signing agreements, the best way for consuming countries to influence oil producers was by strong trade ties, Mr. Drollas said. "So if they [oil producers] are thinking of saying they are not going to sell to you, they will first have to think of the possible economic consequences they could suffer," he said. "A world that is getting closer by trade is the best. All the rest is pie in the sky."

In India and China, however, the reaction has been generally more positive, perhaps because both countries fret that they already operate at a huge disadvantage to resource-rich countries and the oil majors.

R.K. Pachauri, the director-general of the Energy & Resources Institute, a prominent think-tank in New Delhi, said: "It will keep prices at reasonable levels. It will no longer be a zero-sum game."

Although a critic of Mr. Aiyar on governance issues, Mr. Raha supported Sino-Indian energy co-operation in a recent interview with the Financial Times, saying "buyers can have cartels too".

"For every asset on the table, it is always [Petrochina] versus ONGC. We can't carry on like this," he said.

India's co-operation with China is not happening in isolation. Its growing need for energy has helped improve relations with its neighbors, including Pakistan, its long-time enemy.

Among the pipelines in the region now under consideration are ones bringing gas from Iran across Pakistan, one from Turkmenistan across Afghanistan and Pakistan, and even one across India from Iran to China.

In Beijing, Han Xiaoping, of Falcon Power, a consultancy, said China and India had an interest in using their newly-warm political ties as a foundation for energy co-operation.

--Additional reporting by Carola Hoyos in London, Anita Jain in New Delhi, and Khozem Merchant in Mumbai.