OREANDA-NEWS. July 23, 2012. India and China have a good opportunity to shed their competitive rivalry in the field of oil and natural gas exploration to begin a partnership, state media has said, commenting on the recent agreement between two state-owned oil companies.

In June, state-owned ONGC signed an agreement with China National Petroleum Corporation on hydrocarbon exploration, crude oil refining, distribution of petroleum products and in building oil and gas pipelines.

Commenting that the history of rivalry between the two state-owned companies would have continued affect economy, the Global Times said a "tighter alignment" between the two was needed.

"But the logic behind a tighter alignment, rather than a rivalry, between major Chinese and Indian oil companies, is stronger than ever. With greater global scrutiny than ever, China and India have far better institutional capacity, and incentive, than they once did to live up to international commitments that they sign,'' wrote Jeremy Carl, a research fellow at the Hoover Institution at Stanford University and director of research for the Shultz-Stephenson Task Force on Energy Policy.

Under the deal, the two companies will seek to foster cooperation in upstream exploration and production, refining of crude oil and natural gas in midstream or downstream projects, marketing and distribution of petroleum products and in construction and operation of oil and gas pipelines.

Their cooperation will also extend to joint participation in hydrocarbon projects in other countries of interest. ONGC has been working with CNPC in Syria, Sudan and on the Myanmar Pipeline Project where CNPC is a key participant.

Carl wrote that competing with each other in the bidding war would be a strategic mistake for both countries.

"China and India tend to have countries looking for a financial windfall when they compete with each other in a bid. If they can learn to bid jointly and effectively, they are likely to pay far more reasonable prices to access resources," the opinion piece said.

It will also benefit India specifically, Carl wrote.

"State-run Indian oil and gas companies are neither politically, managerially, or strategically as nimble as Chinese oil and gas firms are. Joint projects thus allow them to access supplies they could not have obtained operating alone. India is still a marginal player in the international oil exploration and it is generally ineffective at leveraging the resources of the Indian state to enhance its prospects for winning bids.