Two oil conglomerates in the world's two most populous nations, China and India, have signed an initial agreement for future partnership in a range of oil business operations which include exploration, refining and international trade.

India's second biggest state-run oil company, Hindustan Petroleum Corp, Monday signed a memorandum of understanding with China's top oil refiner, Sinopec Corp, to develop joint projects in the areas of "international trade, exploration & production, refineries & petrochemicals, engineering and technical services, consultancy services, R&D (research and development) etc," the Indian oil firm said in a statement to the Mumbai stock exchange Tuesday.

A source close to the deal, who asked not to be named, confirmed the information to China Daily Tuesday, but declined to elaborate. "It's still a preliminary agreement," the source said.

India's former oil minister, Mani Shankar Aiyar, initiated the partnership talks between Indian and Chinese energy companies during a visit to Beijing in January. India, which relies on imports for about 70 percent of its oil needs, expects to work with China to help secure overseas oil and gas assets at lower prices.

India's biggest gas distributor Gas Authority of India Limited (GAIL) expects to sign an agreement with Beijing Gas Group Company Ltd "within months" to set up a joint venture to meet the surging gas demand in the capital city. That was according to S. Prabhakar Rao, GAIL director for projects, speaking on the sidelines of an oil and gas transport summit last month.

The biggest gas producers in China and Russia are also reported to be signing a memorandum of understanding this month on key issues such as price with a view to supplying gas to China. 

Russia's Interfax reported on Monday that the world's biggest gas producer OAO Gazprom, based in Moscow and China's top oil company, China National Petroleum Corp (CNPC), would soon sign a memorandum on the main details of gas supplies for China. The signing is due to take place during a Sino-Russian summit taking place in Beijing from March 21-22, the agency said, citing Gazprom Deputy CEO Alexander Medvedev.

The Beijing representative of Gazprom Tuesday refused to comment and the CNPC spokesman said he wasn't aware of a possible deal.

Gazprom last September said it was in talks with CNPC to export gas to China through a cross-border pipeline.

The line may run through northeastern China's Heilongjiang Province or the Xinjiang Uygur Autonomous Region  in the west, Medvedev said last year. It is expected to have an annual capacity of as much as 30 billion cubic meters (bcm) a year.

Meanwhile in Washington the chairman of the Senate foreign relations committee said the US must expand international co-ordination of energy issues especially with China and India. This would allow concerns about growing global competition for energy resources to be addressed, the Financial Times reported.

Gas demand in China is expected to reach 120 bcm by 2010 and 200 bcm by 2020. However, it is estimated that domestic production will be just 80 bcm and 120 bcm respectively.

To bridge the gap the country's key energy players, including Sinopec and PetroChina, have significant plans to build LNG (liquefied natural gas) terminals to take gas along the coast. They also plan to build cross-nation pipelines to link the resource-rich west with the energy-hungry east and south.

But high gas prices have prolonged the talks to secure overseas gas sources to feed the growing demand. This may further delay the country's ambitious aim of using cleaner natural gas fuel to meet surging energy demands, industry analysts have said.

(China Daily March 15, 2006)