China and India join hands on oil acquisitions

The demand for oil has been increasing continuously for many years now. After the recession, oil prices have been at what some think can be called peak levels. To bring oil prices under control, economists have thought of an idea. The idea is to go for oil acquisitions in the foreign states which have reserves of oil. China and India have always been in a race for oil acquisitions. But now, they both have realized that instead of competing, it is better to procure oil acquisitions together with an equal number of shares. This is profitable for their economies and they will be sharing the risks and potential losses based on the magnitude of their initial oil investments.

China and India are the 2nd and 4th largest economies to consume oil. Now they have both joined hands to acquire oil reserves in foreign states. By pooling their resources together, both countries have made several oil acquisitions in Middle East countries like Iran. Not only that, they have acquired already established oil wells in foreign countries, and in the process, also found new oil reserves at their existing sites. With the joint efforts of both economies one could see the potential for stable and consistent growth. Indeed, development is continuing at an encouraging pace.

By deciding to pool their resources together, both nations have not only reduced their potential for devastating loss, but have also increased their profit potential. The would-be loss has been decreased because the economies would otherwise have fought hard and spent more in their efforts at buying the most precious oil well reserves. Thus, they have made oil acquisitions at an equal share instead of bidding up prices in competition against each other. The first oil acquisition took place in the year 2005 when the China National Petroleum Corporation (CNPC) joined with the Oil Natural Gas Corporation (ONGC) from India. The joint venture purchased 37% of shares in Petro-Canada’s oil company in the Syrian al-Furat region. Both countries had been working together previously, but this was the first joint cooperative venture in a foreign country.

ONGC and CNPC both have been thinking of various ways to increase revenue from other oil companies within their respective countries. This is a good approach, as the creative ideas, technologies and financial strength of both the economies have been combined to foster growth and development of these proud nations. Many big oil companies, like Mobil and Shell, have been closely observing the various oil investments made by this powerhouse team. For the future, it is better to be together than going different ways, these nations have found. As oil acquisitions require large amounts of financial capital and are accompanied by risk, economies that come together and join hands in a joint venture will realize more fruitful returns.

- Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

Facebook Twitter LinkedIn Google+ YouTube