As China is one of the largest consumers and importers of energy resources, its energy demand and activities are now felt in every corner of the world. South Asia, which is part of China's immediate neighbourhood, is no exception. China is involved in the exploration, production, and transportation of oil and natural gas in the South Asian region. The most important aspect of China being an actor in South Asian energy politics, however, has to do with China's relationship with India in the energy sector. The interactions between the two giants in this respect will be a significant factor in shaping the energy outlook as well as the geopolitical landscape in the region and the world at large. This chapter is intended to examine the prospect of Sino-Indian energy cooperation. It will address three broad issues: the need for cooperation, the current trend in Sino-Indian energy ties, and some of the barriers that need to be overcome for future cooperation.

NEED FOR COOPERATION

Both China and India have been experiencing rapid economic growth. Since 1980, the Chinese economy experienced on average an annual growth of over 9 per cent, whereas the Indian economy grew by more than 5 per cent year on year. Now both countries face an enormous challenge in securing energy supply to sustain their economic growth. Ever since China became a net importer of oil in 1993, its demand of energy has assumed a rapid momentum. An official Chinese report published in 2003 mentions that by 2020, China will have to import 500 million tonnes of oil and 100 billion cubic metres of natural gas. According to another policy report conducted by thirty-one leading Chinese scientists, China's known oil reserve by 2003 was 6.5 billion tonnes, one-fifth of the world's average per capita. And this deposit is rapidly decreasing. In 2003, China's known oil deposit dropped by twenty per cent from ten years ago. It is now increasingly difficult for Chinese oil companies to increase oil output in Chinese territories.