Dragoman Digest

India targets increased oil and gas exploration

Europe will see a silver lining in any dilution of Indian reliance on Russian oil

In a bid to bolster energy security and self-sufficiency, India recently passed a bill to promote oil and gas exploration. On March 12, India’s upper house approved the Oilfield (Regulation and Development) Amendment Bill, revising the 1948 law on oil extraction. The amendment enhances government authority over oilfields, enabling New Delhi to mandate infrastructure sharing, combine petroleum leases and enforce emissions reduction obligations. The hope in New Delhi is that this policy emphasis will provide a fillip to declining domestic production. In 2023, India’s domestic oil production averaged around 700 thousand barrels per day, but projections have indicated that this figure will drop to 540 thousand by 2030. India’s falling domestic oil production is not for lack of prospectivity. For example, only 10 percent of the 3.36 million square kilometres of the waters offshore the Andaman Islands have been explored.

Reducing oil imports will be front of mind for Indian policymakers. From April to December in 2024, India imported nearly 90 percent of its crude oil, placing a considerable drain on India’s balance of payments. There is also a geopolitical element to India’s renewed self-sufficiency push. Russia has become the largest supplier of Indian oil after sanctions blocked Russian oil from European markets and forced Russian producers to offer steep discounts. In some cases, Russian crude is refined in India and exported to the EU. The EU has, on numerous occasions, urged India to close this perceived sanctions loophole. As part of broader trade discussions, Prime Minister Modi has also committed to increasing American oil and gas imports to mollify President Trump. LNG imports are much more prospective for India, as US crude oil is generally incompatible with Indian refineries.

China faces social pressures as its industrial upgrading accelerates

Automation and offshoring are displacing millions of low-skilled workers

China is experiencing a significant decline in labour-intensive manufacturing. Between 2011 and 2023, 7.4 million jobs were lost across 12 labour intensive industries, equivalent to roughly one percent of the country’s total workforce. This contraction spans multiple sectors. Textile employment shrunk by 40 percent from 2011 to 2019, whilst China’s share of global footwear exports has fallen by 10 percentage points over the past decade. Multiple factors are behind this shift, including rising wages in China’s manufacturing hubs, intensifying trade tensions with the US, weakening domestic demand, and the competitive advantages of lower-cost production centres elsewhere in Asia. Vietnam and Indonesia have been primary beneficiaries, adding 10 million manufacturing jobs since 2011.

Smaller Chinese manufacturers now face a stark choice between investing in labour-reducing automation or experiencing gradual obsolescence. President Xi Jinping’s push toward “new quality productive forces” has further emphasised high-level support for upgrading through automation. China’s demographic imperatives provide a further impetus. China’s working-age population peaked at over 900 million in 2011 and is forecast to shrink by almost a quarter by 2050. While automation will help mitigate pressures on China’s cost base, it has potentially severe social trade-offs. The 300 million lower-skilled migrant workers, many from rural areas with limited education, are especially vulnerable – as construction jobs in property and infrastructure also dry up.

Even without automation, the fact remains that ‘new productive forces’ sectors like battery manufacturing generate fewer jobs than China’s previous construction-heavy growth model.  Weak consumption and automation will put further pressure on youth unemployment as university graduates face diminishing prospects in the services sector. Youth unemployment – even according to dubious official statistics that exclude university students – reached 16.9 percent in February 2025. The China Labour Bulletin’s documentation of 452 incidents of labour unrest in 2024 – the highest in a decade – may be a portent of emerging socioeconomic tensions.

The Philippines considers instituting an Indonesia-style export ban on raw nickel exports

The Philippines is one of several countries seeking to emulate Indonesia’s resource nationalism

The Philippines is considering following Indonesia’s lead by implementing a ban on raw mineral exports, with a proposed amendment to existing legislation introduced in Congress on February 3. If ratified when Congress reconvenes in June, the ban would take effect in five years, allowing mining companies time to establish local processing facilities. This proposal is similar to Indonesia’s 2020 export ban on nickel, which has attracted at least US$30 billion in Chinese downstream investment alone. As the world’s second-largest producer of nickel, the Philippines believes it is well placed to develop a robust local refining sector and increase local value-add. Previous proposals to implement such an export ban in 2014 and 2016 failed due to lack of support from Congress.

The Philippines faces several significant challenges to replicating Indonesia’s success. Filipino electricity costs averaged US$0.19 per kilowatt-hour in Q4 2024. The only Southeast Asian country with higher rates was the much wealthier Singapore. These electricity costs may make local mineral processing prohibitively expensive. The Philippines will need billions in infrastructure investment if it is to emulate the sprawling nickel processing hubs that Indonesia has built in Central Sulawesi and North Maluku. Price is perhaps the most significant obstacle. A sustained slump in nickel prices due to oversupply from Indonesia has led to nickel mines and smelters shuttering in countries including Australia. In Indonesia, many operations are now marginal resulting in Jakarta cutting its annual nickel quota from 272 million tons to 150 million tons.

China’s battery storage giants clinch key deals in Arab Gulf countries

China is targeting the Gulf as Western trade prospects dim

China is consolidating its dominance in the Battery Energy Storage Systems sector (BESS) through deals in Arab Gulf countries. On February 20, BYD announced a significant agreement to supply 12.5 GWh of grid-scale storage systems to Saudi Electricity Company (SEC). Despite its primary business operation in automotives, BYD also has a considerable presence in BESS. A similar agreement took place in January 2024 when CATL, better known for its EV battery manufacturing, confirmed a deal to provide 19 GWh of BESS to the UAE’s Masdar to support a 5.2 GW solar farm. Both Saudi Arabia and the UAE are building cost competitive utility scale renewables to help reduce reliance on fossil fuels. These projects will increasingly need large scale BESS given the intermittent nature of renewables.

As domestic competition intensifies and China face additional trade barriers in Western markets, these agreements will become particularly attractive. China’s expanding footprint in the Gulf is particularly visible in Saudi Arabia. A significant portion of China’s US$21.6 billion in investments in Saudi Arabia has been in renewable energy and related industries, including manufacturing. One example is a major joint project between Aramco and China National Building Material Group to manufacture wind turbine blades and energy storage solutions. Although Chinese influence in the Gulf should not be overstated, Gulf capitals are increasingly seeing China as one of several vital partners in enabling economic diversification initiatives.

ASML caught in US-China tech rivalry crossfire

ASML’s predicament is reflective of the continent’s broader struggle to chart an independent industrial strategy

ASML’s CEO Christophe Fouquet has warned that European technology champions may relocate if forced to align with Washington’s export controls over their own economic interests. The Dutch giant currently controls over 90 percent of the lithography equipment market. These machines use light to etch microscopic circuit patterns onto silicon wafers – a critical process enabling modern computer chips. Fouquet’s call for European policymakers to determine their own course highlights growing frustration from companies being drawn into intensifying US-China competition.

The Dutch government first restricted ASML’s ability to sell advanced extreme-ultraviolet (EUV) lithography machines to China in 2019, following intensive American lobbying. These controls have expanded to encompass even older deep-ultraviolet (DUV) machines. Chinese firms responded by stockpiling ASML’s equipment ahead of these controls, with imports of DUV machines to China surging 1,000 percent in December 2023 to US$1.1 billion. Amidst the gradual tightening of export controls, ASML has forecast that China’s share of its global sales would decline from 36 percent in 2024 to 20 percent this year.

China’s pursuit of domestic lithography capabilities presents an additional longer-term challenge. Linked to Huawei, which is attempting to build-out an entirely Chinese semiconductor supply chain, Shenzhen SiCarrier Industry Machines claims to have developed lithography machines capable of producing 28-nanometer chips. SiCarrier is also exploring multi-patterning techniques with DUV technology to potentially achieve 5-nanometer capabilities. However, commercial viability remains unproven. Previous Chinese attempts to challenge ASML have repeatedly faltered. In 2020, Shanghai Micro Electronics Equipment (SMEE) also announced a comparable lithography system for delivery in 2021, yet no evidence suggests these machines have been adopted by chipmakers. Whilst other Chinese semiconductor equipment manufacturers specialising in less technologically complicated areas have seen substantial revenue growth, replacing ASML’s lithography expertise presents a vastly greater challenge. ASML’s 5,000 specialised suppliers spread out globally would be extraordinarily difficult for China to replicate independently.