Abstract
When a resource-deficient country becomes industrialised lifestyles become increasingly energy intensive, compelling it to seek resources overseas. This search for overseas assets is often advantaged by making investments in the infrastructure of the host country in order to gain preferential access to resources. While this was the strategy followed by the Western countries through their oil companies during their rapid phase of industrialisation, currently it is the activities of the Asian, particularly the Chinese and Indian, national oil companies (NOCs) that are becoming the focus of media attention. According to Wood Mackenzie’s annual review of global upstream mergers and acquisitions in 2010, Asian NOCs invested $35 billion in overseas acquisitions. An International Energy Agency (IEA) report also stated that Chinese companies alone spent approximately $29.39 billion, more than half of which was invested in Latin American countries.
Strangely, the jury is still out on whether overseas asset acquisitions enhance a country’s energy security, and whether the returns from these assets justify the huge investments in costly upstream projects. In fact, according to the Integrated Energy Policy report, the committee ‘felt that obtaining equity oil, coal and gas abroad do not represent adequate strategies for enhancing energy security beyond diversifying supply sources’. However, in 2010 India’s policy-makers made this strategy the basis of the country’s energy security policy. Former petroleum minister Murli Deora in fact said, ‘Acquisition of exploration and oil producing properties overseas is a key strategy to reduce our dependence on world’s oil reserves’. With the country’s oil imports alone expected to account for 90 per cent of total oil demand by 2030, and an oil import bill equivalent to almost seven per cent of the country’s GDP, it should not come as a surprise that India’s energy policy is focusing on acquiring overseas hydrocarbon assets.
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