India warned against exploring oil in disputed South China Sea

BEIJING (TIP): A Chinese government think-tank researcher has warned India against participation in oil projects with Vietnam government on the disputed islands of South China Sea. Indian oil companies cannot get cooperation from China in gas pipeline and oil exploration projects if they continues to work in the region, Liu Qian said in an article in the State-controlled Global Times.

Liu is a researcher with the Academy of Chinese Energy Strategy with the China University of Petroleum in Beijing. “If India insists on exploiting the resources in the South China Sea with Vietnam regardless of warnings from China it is hard to see how China can be motivated to cooperate with India,” Liu sad.

China and Vietnam are locked in a dispute over ownership of the oil bearing islands. Describing India and China as “natural rivals” in the global energy industry, Liu said the two countries should try to forge greater cooperation instead of getting involved in intense rivalry. In most cases Indian companies lose out to Chinese firms which is why they respond with “hot fighting words”, Liu said. But China finds that the cost of intense competition is unbearable and wants cooperation with India.

Intense competition is forcing Chinese companies to pay higher premium for oil assets in third countries like Kazakhstan, Angola and Ecuador, the article said. “But this (high premium) is not sustainable for Chinese firms. And Indian companies also need to avoid too much competition to save money. This offers room for cooperation between China and India,” Liu said. India and China are wary about each other’s attempt to exploit gas reserves in Turkmenistan.

China is expected to seek a portion of the gas from the proposed Turkmenistan-Afghanistan-Pakistan-India pipeline, Liu said. “The current problem lies in how to avoid unnecessary competition and excessive speculation between the two and how to establish a coordinating mechanism for bilateral cooperation,” the article said while calling on the governments of the two countries to bring about cooperation between cross-border oil companies. Chinese companies has won against Indian firms in competition for overseas oil projects because they offer more favorable returns which includes financial payments, technology support, infrastructure construction, management experience and staff training, it said.

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