India turns its energies on Africa
By Sudha Ramachandran
BANGALORE - With an eye on meeting its soaring energy demands and decreasing
its dependence on Gulf oil, India is wooing Africa with a vengeance.
Oil ministers from 10 African countries and delegations from 16 others were
courted at a two-day India-Africa Hydrocarbon Conference at New Delhi this
week. India has in the past organized business conferences focusing on Africa,
but this is the first sector-specific conclave to engage the continent.
India imports over 70% of its crude oil needs and, according to World Energy
Outlook, published by the Paris-based International
Energy Agency, its dependence on oil imports will grow to 91.6% by 2020.
Sixty-five percent of India's oil requirement is met by the Gulf. Worried about
its excessive dependence on the Middle East - a region of perennial turmoil -
India has been scouting for oil outside this region.
It is in this context that Africa is emerging as an attractive partner. The
continent holds about 10% of global oil reserves; six countries - Angola,
Algeria, Egypt, Libya, Nigeria and Sudan accounting for 95% of that reserve.
Besides, it accounts for 7% of global natural gas production.
Africa's estimated oil reserves are small compared with those in the Gulf, but
the quality of its crude - the kind found in the Gulf of Guinea is light and
sweet, ie viscous and low in sulfur - makes it an attractive option as it is
easier and cheaper to refine than Middle Eastern oil. Moreover, most of it is
located offshore, which means decreased transport costs and reduced risk of
political violence.
As John Ghazvinian points out in his book Untapped: The Scramble for Africa's
Oil, in Africa "existing sea-lanes can be used for quick, cheap
delivery, so there is no need to worry about the Suez Canal, for instance, or
to build expensive pipelines through unpredictable countries". African oil "is
simply loaded onto a tanker at the point of production and begins its smooth,
unmolested journey on the high seas, arriving just days later in Shreveport,
Southampton, or Le Havre."
In a nutshell, Africa's oil "is cheaper, safer and more accessible than its
competitors, and there seems to be more of it every day".
Africa meets 16% of India's oil needs. "In the next two to three years, India's
imports from African countries are expected to touch 20-21%, around 24-25
million tonnes," M S Srinivasan, secretary, India's Ministry of Petroleum and
Natural Gas, said. India is keen to acquire more oil and gas fields as well as
bag other energy projects, such as refineries, petrochemical plants and
pipelines in Africa. Besides oil, India is also interested in importing
liquefied natural gas (LNG) from Nigeria, Algeria and Egypt.
Srinivasan also drew attention to the growing importance of Africa in India's
investment plans. "For the 12th five-year plan [2012-2017], ONGC Videsh Ltd
[OVL - the overseas arm of the state-run Oil and Natural Gas Corporation] alone
has set a target of over $12 billion for investment abroad," Srinivasan said,
adding that "a significant part of that will go to Africa".
India has strong historical and cultural links with Africa. Besides, its
campaign in global forums to end apartheid in South Africa and secure the
decolonization of African countries is well known. Consequently, it has enjoyed
immense goodwill in the continent. (Idi Amin's Uganda in the 1970s being a
notable exception.)
However, with India giving priority to ties with the US and Europe as well as
East Asia, Africa was relegated to the sidelines in India's foreign-policy
interests. And in the process, India ceded its influential role in Africa to
another Asian giant - China.
China currently sources 30% of its oil imports from Africa, which amounts to
about 37 million tonnes (India gets about 18 million tonnes from Africa).
Today, as India seeks to regain lost ground in Africa, it is China that it is
bumping into across the continent. And it is competition from China that India
is having to fight off in the course of its African oil safari.
At the Delhi conference, India indicated that its strategy for building
partnerships with Africa in the energy field is similar to the one adopted by
China. China has wooed Africa with soft loans, development aid, arms transfers
and political support to bag lucrative oil projects.
India has indicated that it, too, is open to an aid-for-oil strategy and will
back this up by extending credit too. Soft loans at the rate of 0.5-1.75%
interest for a period of 15 to 20 years are in the pipeline. The money can be
used for infrastructure as well as for oil sector projects.
China is involved in a big way in infrastructural development in Africa, where
it is building roads, railways, harbors, hospitals, stadiums and petrochemical
installations. It has offered African governments attractive lines of credit.
At a meeting of the African Development Bank in Shanghai in June, China pledged
$20 billion in infrastructure and trade financing to Africa over the next three
years. It has promised to double development assistance to Africa by 2009.
Having already written off debts of almost $1.5 billion in the continent, it
has promised to write off a similar amount again.
Indian officials point out that India has already tried the aid-for-oil
strategy in Africa. In 2005, Mittal Steel and ONGC announced an investment of
$6 billion to establish a refinery, power plant and railway lines in Nigeria
through a joint-venture company, ONGC-Mittal Energy Ltd (OMEL). Under the
mega-deal between ONGC and the Nigerian government, OMEL would create the
infrastructure, while Nigeria would give it oil blocks.
ONGC has pumped $2 billion into eight countries in Africa, including Sudan,
Libya, Egypt and Nigeria. The consortium of Indian Oil Corporation (India's
biggest state-run refiner) and Oil India has invested $125 million in Libya,
Nigeria and Gabon. It has two blocks in Libya, and one block each in Nigeria
and Gabon. GAIL (India) Limited has entered into a joint venture for a gas
distribution project in Egypt and has signed up for pipeline and city gas
projects in Libya.
OVL, which is present in three blocks in Sudan and on its way to joining a
fourth, has applied for two more blocks in the country, Sudanese energy
minister Awad Ahmed al-Jaz announced in Delhi.
OVL wants to buy a 30% stake from Petronas of Malaysia in the massive Block 8
in the Blue Nile Basin, northeast of Sudan's Melut Basin. Petronas Carigali
Overseas has a 77% interest in the block, while the remaining equity is shared
between Sudan's national oil company Sudapet (15%) and High Tech Group (8%).
OVL managing director R S Butola said the company is also keen on taking the
unallocated 32.5% stake in Block B.
GAIL announced it is looking for a stake in a LNG plant in Nigeria and is
interested in setting up a gas-based petrochemical plant in this country. It
has announced that it will supply gas from Nigeria to Darfur.
Last month, India's Prime Minister Manmohan Singh visited Nigeria, the first
Indian premier to do so in 45 years. The two countries signed an array of
agreements and took steps to deepen their energy and economic partnership that
would include new oil exploration blocks and infrastructure deals.
At the Delhi conference, IOC announced plans to raise its annual Nigerian crude
imports from the current 2 million tonnes to 3 million. "We are in talks with
Nigeria and some other African countries for exploration and production
blocks," IOC's business development director B M Bansal was quoted as saying.
IOC is keen on buying stakes in refineries in Africa, but only if the refinery
comes as part of a package that includes an oil or gas block.
IOC has also offered to invest in a gas-based petrochemicals plant and to set
up a LNG facility in Mozambique.
At the Delhi conference, India signaled that it was interested not just in
buying Africa's oil but in participating in all phases of its production,
refining, storage and transport. Moreover, it clarified that while gaining from
Africa's oil, it would give back, and it would contribute to capacity building.
"India stands ready to share its experience with its African partners in the
hydrocarbon sector, from exploration to distribution through refining, storage
and transportation," External Affairs Minister Pranab Mukherjee told the
participants, adding, "Over a period of time, investment in this sector will
directly assist in the building up of a trained and skilled workforce capable
of efficiently running the assets."
In its competition with China for Africa's oil, India finds itself at a
disadvantage. It lacks China's deep pockets, which have proved crucial in
swinging deals in Beijing's favor. In Angola, for instance, India had almost
clinched a deal with Anglo-Dutch energy giant Shell to purchase a 50% share in
an oil-exploration project. It had offered $200 million in aid. But China
offered Angola $2.3 billion. The deal went to China.
Sudha Ramachandran is an independent journalist/researcher based in
Bangalore.
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