Joint bids make oil hunt cheaper

The coming together of India and China in the race for acquiring overseas energy assets is expected to put a check on the spiralling prices of global oil properties.

ONGC and CNPC of China had signed a deal on December 19 to acquire Petro-Canada's 37 per cent stake in Syrian oil fields for $573 million.

Analysts pointed out that aggressive bidding by both India and China in the recent past had led to oil assets being sold at "unreasonably" high prices.

"Competition between Indian and Chinese companies for submitting offers for oil fields has tended to significantly boost the prices of such assets. Joint bids by India and China will encourage more realistic offers," said Talmiz Ahmed, special secretary in the ministry of petroleum and natural gas.

Ahmed said the closing price for the Syrian bid would have been much higher had India and China not been on the same side.

It is worth noting that Indian Oil Corporation had quit the race for the Tupras refinery in Turkey earlier this year after it felt that the acquisition price was unrealistically high in open auction.

"The joint bid by ONGC and CNPC is certainly the first partnership in energy co-operation between the two Asian giants. But it is no assurance that this co-operation will expand rapidly across the energy landscape," said Gokul Chaudhuri, partner, BMR & Associates.

Both ONGC and CNPC, and their respective political masters, are expected to closely observe the performance of this joint initiative over a good length of time before clearing more tie-up efforts. However, they may continue to initiate dialogues to mitigate mutually damaging competition for oil assets.

"It is likely that both companies will find themselves competing with each other on more occasions than one rather than co-operating," Chaudhuri added.