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http://www.businessweek.com/news/2010-03-16/india-said-to-propose-sovereign-fund-to-acquire-energy-assets.html
March 17 (Bloomberg) -- India, with $254 billion of foreign-exchange reserves, may create a sovereign wealth fund to help state companies compete for overseas energy assets with China, a government official said.
The oil ministry has formally asked the finance ministry to set up a fund using a part of the reserves, the official said, declining to be identified because a decision hasn’t been reached. The size of the fund is yet to be determined, he said.
“Such a fund would be very, very welcome if we are to compete with the Chinese,” R.S. Sharma, chairman and managing director of state-run Oil & Natural Gas Corp., India’s biggest energy explorer, said by telephone from New Delhi.
China, with $2.4 trillion of reserves and a $300 billion sovereign fund, has outpaced India in the global quest for resources to feed the world’s fastest-growing major economies. Chinese companies spent a record $32 billion last year buying oil, coal and metals assets abroad, while a $2.1 billion investment by ONGC was India’s sole energy acquisition.
“India needs to speed up overseas acquisitions to cater to economic growth,” Dharmakirti Joshi, principal economist at Crisil Ltd., the Indian unit of Standard & Poor’s, said from Mumbai. “India’s forex reserves have been strong enough of late and companies here need a boost.”
Oil Minister Murli Deora declined to comment. B.S. Chauhan, finance ministry spokesman, said he can’t comment on discussions between ministries.
Plans Blocked
Cnooc Ltd., China’s biggest offshore oil explorer, on March 14 agreed to buy half of Argentina’s Bridas Corp. for $3.1 billion, its biggest purchase, capping $6.6 billion of acquisitions on three continents in the past four years. Cnooc bought a stake in a Nigerian oil field in 2006 after India’s government blocked ONGC’s plan to buy the share.
China Investment Corp., the country’s $300 billion sovereign wealth fund, last year invested in energy and mineral producers in nations including Canada, Indonesia and the U.S. while China Development Bank Corp. gave China National Petroleum Corp., PetroChina Co.’s parent, a $30 billion loan at a discounted interest rate to fund overseas expansion.
“If you look at what Chinese companies have spent in recent years, you’re looking at investment of maybe $10 billion to $15 billion a year,” said Neil Beveridge, an energy analyst at Sanford C. Bernstein Ltd. in Hong Kong. “India is looking at increasing demand for oil and gas as its economy expands and it needs to secure resources,” he said. “It certainly makes strategic sense to set up a fund.”
Demand for fuel in India, the world’s second-most populous nation, may rise as growth in the $1.2 trillion economy accelerates and output from aging domestic fields declines. India’s finance ministry expects gross domestic product to expand 8 percent in the year starting April 1. The South Asian nation imports more than 75 percent of its crude oil needs.
India’s total energy consumption may more than double by 2030 to 833 million tons of oil equivalent, based on current trends, driven by population growth and an industrial build-up, according to the Paris-based International Energy Agency.
ONGC last year bought Imperial Energy Plc for 1.4 billion pounds ($2.1 billion) in India’s biggest energy acquisition.
