On Aug. 22, PetroKazakhstan Inc., a Canadian-owned company with oil fields in Central Asia, accepted a $4.2 billion takeover bid by state-owned China National Petroleum Corp. CNPC beat a $3.6 billion offer from India's own state-owned giant, Oil & Natural Gas Corp. ONGC has said it may make a counteroffer, but the competition has already pushed the price into the stratosphere.
The Chinese are gaining ground in Russia. Last December both New Delhi and Beijing negotiated with Moscow as it sought financing for its $9 billion renationalization of Yuganskneftegaz, the core production subsidiary of the troubled oil major Yukos. Although neither Asian rival walked away with equity in the Russian company, the Chinese ended up lending the Russians $6 billion in return for guaranteed oil supplies at a bargain price. And in Angola last year, China Petrochemical Corp. (better known as SINOPEC) beat ONGC in bidding for an oil exploration block being sold by Shell Oil Co.
That's largely because China has greater financial muscle. In the past five years, CNPC has invested $45 billion in new energy sources, compared with ONGC's $3.5 billion. Another problem, some grumble, is India's democratic -- and therefore slow -- political system, which may make it harder for ONGC to jump at investment opportunities abroad. "Whenever we've seen the Indians and Chinese tussle, the Chinese have been faster and more aggressive in attaining their objective," says Stephen O'Sullivan, head of research at United Financial Group.
But don't count India out yet. The country's hopes of international expansion are being kindled by Delhi's energetic Petroleum & Natural Gas Minister, Mani Shankar Aiyar. And despite China's deal with Russia after the competition for Yuganskneftegaz, India holds some strong cards with regard to Russia, which is rapidly emerging as a key source for Asia's energy needs. Moscow has a friendship with Delhi that dates to the Cold War -- while the Kremlin has long viewed Beijing with mistrust. India and Russia have been busy bolstering their extensive military and scientific ties, most recently through Delhi's Aug. 16 purchase of 250 Russian engines for use in a new Indian military jet trainer. India has already invested $1.7 billion in Sakhalin-1, a major oil-and-gas field off Russia's Pacific coast, and recently committed an additional $3 billion for investments in other projects.