Energy: India loses to China again

Posted in India | 16-Jan-06 | Author: Siddharth Srivastava

Siddharth Srivastava is WSN Editor India.

NEW DELHI: The decision by the Myanmar government to supply gas to China has come as a setback to India, especially to the $ 1 billion Myanmar-Bangladesh-India (MBI) gas pipeline. The reason for Myanmar’s tilt towards China is due to the delays in implementing MBI. However, the trickier aspect is that New Delhi did not know about the deal for more than a month, despite Yangon and Beijing agreeing to do so. It goes to show that despite New Delhi’s insistence that India and China should join hands in bidding for energy resources to circumvent overpaying, there is still a lot of ground to cover. And if matters come to a crunch, it will be naïve of India (as much as China), both countries starved of energy resources, to expect the other to show any leeway.

According to reports attributed to officials in Yangon and New Delhi, Myanmar has inked a memorandum of understanding (MoU) with PetroChina for supplying 6.5 trillion cubic feet (tcf) of gas from Block A in the Bay of Bengal for over 30 years. An assessment of the Shwe gas field portion of A1 block by the Houston-based Ryder Scott Company in December had estimated gas deposits of 2.88 trillion to 3.56 trillion cubic feet. The A1 block is being developed by a consortium headed by South Korea's Daewoo International Corp that holds a 60 % stake while India's state-run Oil & Natural Gas Corp

(ONGC) has 20 % share in the bloc and the Gas Authority of India and Korea Gas Corp. each hold 10 %.

Paradoxically, news about Myanmar’s decision to sell gas to China came on the eve of petroleum minister Mani Shanker Aiyar's three-day visit to China last week, to discuss bilateral cooperation for energy sources. Aiyar, who has been an advocate of Sino-India joint biddings to rein competitive price hikes, told reporters that although this looked like a setback for India, it would continue efforts with Myanmar. He said Myanmar and PetroChina had only come to an ``in-principle’’ agreement, which was not a commercial commitment. Besides, India has other options, he added.

Public postures apart, there is no doubt that India will be very disappointed by the turn of events. Aiyar is scheduled to visit Yangon later this month in connection with the proposed pipeline. What is worse for India is that Myanmar did not inform India about the MoU though the agreement was signed in December but not announced in Myanmar’s state-owned media. This fact came to light when a senior official of India’s petroleum ministry returned earlier this month cutting short his trip to Yangon, after the Myanmar authorities told him about the tie-up.

In the past year Aiyar has been shuttling between Iran, Bangladesh, Pakistan, Myanmar and Central Asian countries, in a bid to ramp up India’s energy deficit. India imports 70 % of its crude requirements compared to China’s 40 % and has been desperately looking for other sources of energy including gas and nuclear fuel.

In January last year, India had reached an agreement in principle with Myanmar and Bangladesh on a pipeline that was slated to bring natural gas from Myanmar's Shwe gas fields to India via Bangladesh. Under the agreement, Dhaka could decide whether to supply its own gas into the Burma pipeline without any fear of depending too much on its giant neighbor on the west, India.

Last September, a fractured leg did not prevent Aiyar from proceeding to Dhaka from London (where he was on a visit) for talks on MBI. Aiyar said that there has been positive development on the tri-nation pipeline. There was reason for Aiyer to hobble to Bangladesh. With the Iran-Pakistan-India

(IPI) gas pipeline caught in a logjam, due to US mistrust of Tehran, high-level meetings chaired by Prime Minister Manmohan Singh and other cabinet ministers authorized Aiyar to visit Dhaka for talks to finally thrash out the details of a trilateral memorandum of understanding that had been delayed over inclusion of bilateral issues. With US interests in these regions quite minimal for the moment, India has been leading the talks with the two nations to settle the differences. Some Indian analysts predicted early breakthroughs, with the project possibly moving onto an implementation stage quicker than expected.

However, Yangon has been unhappy about the pace of progress of the MBI due to issues raised by Dhaka. Though Bangladesh stands to earn substantial transit fees of $ 125 million per year, it has set conditions that include creation of corridors through India to carry out trade with other neighbors such as Nepal and Bhutan as well as steps to reduce its $ 2.5 billion trade deficit with India.

New Delhi and Yangon have also been exploring independent alternatives for importing gas. Bangladesh was not invited to the third meeting on the project in New Delhi. Aiyer has talked of the possibility of constructing the pipeline from Myanmar into Mizoram and onwards to Assam (both in north east India) and culminating in West Bengal, a distance of 1,400 km. This route is approximately twice the length the pipeline would travel if it were to pass through Bangladesh. However, given the economic advantages as well as higher feasibility, India opened another window for negotiations with Bangladesh. Former foreign minister Natwar Singh visited Dhaka in August last and said that the tri-nation project would not proceed without the involvement of Bangladesh.

Thus, the decision by Myanmar to deal with China comes as a major blow to India’s bid to tap gas from its eastern front. It could mark yet another victory for Beijing energy giants that have been consistently beating Indian energy firms in acquisition of oil and gas reserves around the world.

India's ONGC has lost to Chinese companies in Kazakhstan, Ecuador and Angola, and most recently in Nigeria after the Indian cabinet raised concerns about security.

Clearly, all the Indian efforts on MBI now appear to be too little too late.

According to reports, Myanmar is still interested in supplying gas to India but does not want to waste time waiting for India and Bangladesh to sort out their bilateral problems. Experts have said that in the new scenario the cost of the MBI will increase as the available block close to Bangladesh bordering area is A-2 and if the Myanmar authorities want to sell gas to India, at least 150 km additional pipeline will have to be built to reach out gas to India.

During Aiyar's visit to Beijing last week, India and China signed a slew of MoUs on energy cooperation, including between ONGC Videsh Ltd, India's flagship firm for overseas oil and gas field acquisitions, and China National Petroleum Corporation (CNPC). In the first instance of Sino-Indian cooperation, India and China won a joint bid in December last to buy PetroCanada's 37 % stake in Syrian oil fields for $ 573 million dollars.

However, most observers believe that any co-operation in future can only be on a case-to case basis, with the Myanmar-China deal demonstrating that when it comes to energy security, nations will go it alone, if they can.