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India turns its energies on Africa

Source: Asia Times Online
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.

India for ties with energy-rich African nations

Sujay Mehdudia

— Photo: Sandeep Saxena

OIL DIPLOMACY: External Affairs Minister Pranab Mukherjee and Petroleum Minister Murli Deora (left) with Sudan’s Energy and Mines Minister Aead Ahmed Al-Jaz at the inauguration of India-Africa Hydrocarbons Conference in New Delhi on Tuesday.

NEW DELHI: India on Tuesday said the unprecedented rise in international oil prices posed a danger of economic dislocation to developing countries and could have a cascading effect on both oil producing and consuming nations.

Delivering a special address at the first India-Africa Hydrocarbons Conference here, Petroleum and Natural Gas Minister Murli Deora said the rise in crude oil prices was a matter of concern to all developing countries.

The conference is jointly organised by the FICCI and UNCTAD.

India, which imports 73 per cent of its oil needs, has been hit by the surge in international crude prices that touched $96 a barrel last week.

Indian Oil Corporation,Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited are now losing Rs. 240 crore a day on selling petrol, diesel, LPG and kerosene.

Mr. Deora said the greatest challenge was meeting the rapidly expanding energy needs of people in a cost-effective and environment-friendly manner.

During these challenging times, the spectacular oil reserves of Africa were gratifying, he sought and sought greater cooperation with energy-rich African nations.

India was seeking oil and gas blocks in nations such as Nigeria, Sudan and Egypt to bridge the energy deficit it faced. Mr. Deora said: “We are committed to ensuring our billion strong nation affordable access to energy. To insulate our economy from the vagaries of the international oil market and inflationary pressures that could arise from transferring the entire price rise to end-users, the Indian government and the national oil companies are absorbing over 85 per cent of the difference between cost of import and domestic oil prices.”

India woos fuel-rich African states

4 days ago

NEW DELHI (AFP) — Energy-starved India stepped up efforts to woo fuel-rich African states on Tuesday hosting the first India-Africa hydrocarbon conference as oil prices surged towards the 100 dollar mark.

Oil Minister Murli Deora urged African countries such as Nigeria, Sudan and Egypt to "use the opportunity ... to develop strong business ties ... for mutual benefit."

Rising oil prices, Deora told the opening day of the two-day meet, were "a matter of grave concern to all developing countries due to the imminent danger of economic dislocation and its cascading effect on both oil producing and consuming countries.

"As legitimate energy demands of developing countries grow in order to fuel their economic growth, the spare capacity across the global supply chain has been diminishing feeding speculative interests in the oil market," he said.

Against this backdrop, "the spectacular oil reserves of Africa are gratifying," Deora said, seeking greater cooperation between India and energy-rich African nations.

India, which currently imports more than 70 percent of its energy needs, is seeking new supplies of oil and gas from abroad as well as ramping up production from domestic sources to fuel runaway economic growth.

New York's light sweet crude for delivery in December climbed 1.19 dollars to 95.17 dollars a barrel from its close of 93.98 in US trades on Monday. It hit a record high of 96.24 dollars last Thursday.

Oil ministers from eight countries and delegations from some 18 others are taking part in the conference that concludes Wednesday.


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