A peep into en­ergy ties

Delhi is in­creas­ingly look­ing to­wards the con­ti­nent to meet its grow­ing hy­dro­car­bon de­mand

Governance Now - - EMPLOYMENT GURANTEE - Ra­jen Harshé Harshé is founder vice chan­cel­lor of the Cen­tral Univer­sity of Al­la­habad and pres­i­dent, GB Pant So­cial Sci­ence In­sti­tute, Al­la­habad.

Since the dawn of this cen­tury, ow­ing to their grow­ing in­ter­de­pen­dence, in­dia’s ties with the african states have grad­u­ally been ac­quir­ing sig­nif­i­cance in a rapidly glob­al­is­ing world. such in­ter­de­pen­dence is man­i­fest­ing it­self quite clearly in eco­nomic, de­vel­op­men­tal and politico-strate­gic spheres of bi­lat­eral as well as mul­ti­lat­eral ac­tiv­i­ties. amidst all th­ese wide-rang­ing ar­eas of co­op­er­a­tion, the en­ergy sec­tor de­serves an ap­praisal be­cause en­ergy has ac­quired very sig­nif­i­cant place in in­dia-africa ties.

Grow­ing sig­nif­i­cance of en­ergy to in­dia’s econ­omy could be ex­plained with ref­er­ence to ac­cel­er­a­tion of the pace of eco­nomic lib­er­al­i­sa­tion af­ter 1991. it fa­cil­i­tated in­dia’s out­ward ex­pan­sion. it has had cer­tain pos­i­tive re­sults such as con­spic­u­ous rise in for­eign ex­change re­serves to the tune of roughly $393 bil­lion by 2017, steady eco­nomic growth at an av­er­age of over 6 to 7 per­cent dur­ing the past two decades, bour­geon­ing mid­dle classes con­sti­tut­ing roughly over 200 mil­lion peo­ple along with the grad­ual in­te­gra­tion of in­dia’s econ­omy into the world econ­omy. in or­der to sus­tain high growth rates while en­sur­ing de­vel­op­ment, in­dia des­per­ately needs en­ergy se­cu­rity. in­dia’s de­mand for en­ergy sources such as oil are still be­ing met by the en­ergy heart­land of the world con­sti­tuted by the west asian states such as iran, iraq, saudi ara­bia and the uae. How­ever, ow­ing to the rise of transna­tional ter­ror­ist out­fits such as Al Qaeda and the is­lamic state (is) cou­pled with rad­i­cal­i­sa­tion of is­lam, the West asian states are no longer safe and se­cure sources of en­ergy sup­ply.

En­ergy sec­tor in a broader frame­work

con­se­quently, in­dia has turned to african states. The indo-african co­op­er­a­tion in the en­ergy sec­tor can be bet­ter ap­praised by plac­ing in­dia-africa co­op­er­a­tion in a broader con­text. at the macro level, in­dia by con­sis­tently hold­ing in­dia-africa Fo­rum sum­mits (iafs) in places like New delhi (2008), addis ababa (2011) and New delhi (2015) has al­ready forged ties with the 54 african states through the african union (au). Th­ese sum­mits have given a ma­jor plat­form for in­dia, in­clud­ing its pri­vate sec­tor com­pa­nies, to forge mul­ti­ple lev­els of re­la­tion­ships with dif­fer­ent African states. in­dia’s quest to pro­mote de­vel­op­ment co­op­er­a­tion in­volves trade, aid, busi­ness and in­vest­ments. The fig­ure of indo-african trade stood at record high of $75 bil­lion in 2015.

The Modi gov­ern­ment has al­ready an­nounced $10 bil­lion con­ces­sional grant to african states dur­ing the iafs of 2015 for the next five years. In­deed, over 4,00,000 of in­dia’s busi­nesses were reg­is­tered in africa by 2013 and by now 34 african states en­joy duty-free ac­cess in the in­dian mar­kets. in­dia’s in­vest­ment in africa is es­ti­mated to be $50 bil­lion which is more than china’s. strangely, a sub­stan­tial por­tion of it is in the Mau­ri­tius which has sprung up as pop­u­lar tax haven for indians. Be­sides, In­dia’s in­vest­ments are flow­ing into africa from the ed­u­ca­tional in­fra­struc­ture and en­ergy sec­tor to the build­ing of rail­ways and roads in africa. en­ergy-re­lated co­op­er­a­tion forms a part of this multi-lay­ered and com­plex web of in­dia-african re­la­tion­ship.

Grow­ing re­quire­ments of en­ergy se­cu­rity

The fourth in­dia-africa hy­dro­car­bon con­fer­ence was held in New delhi in Jan­uary 2016 where 22 african states par­tic­i­pated out of which nine del­e­gates rep­re­sented min­is­te­rial level. in­dia im­ports 75 per­cent of its crude out of which al­most 26 per­cent comes from africa. in­dia is likely to be among the most im­por­tant driv­ers of en­ergy de­mand in the next few decades. in this con­text, the gulf of guinea which is of­ten de­scribed as the Per­sian gulf of Africa has be­come a sig­nif­i­cant re­gion from the point of in­dia’s en­ergy se­cu­rity. among the states from the gulf of guinea, in­dia im­ports 12 per­cent of oil re­quire­ments from Nige­ria which has emerged as the fore­most ex­porter of oil to in­dia among the african states. in­dian Oil Cor­po­ra­tion, the largest oil re­finer, has dou­bled the im­port from Nige­ria at 60,000 bar­rels a day and so has Hin­dus­tan Pe­tro­leum. in­dia’s ongc Videsh lim­ited (ovl) and Mit­tal en­ergy (Mel)

even had made a joint bid at oil ex­plo­ration ven­tures in two blocks in Nige­ria in 2005. How­ever, Mel gave up its oil block in Nige­ria while ovl has stayed on. ovl has in­vested quite sub­stan­tially in equity as­sets in côte d’ivoire, Nige­ria, an­gola and gabon in the gulf of guinea and North african states such as libya and egypt. sim­i­larly, op­er­a­tions of in­dia-fo­cussed/based pri­vate play­ers such as es­sar in Nige­ria and Mada­gas­car and re­liance in su­dan have fur­ther un­der­scored how the in­dian oil com­pa­nies are steadily ex­pand­ing their in­ter­ests in the pe­tro­leum sec­tor in africa.

What is more, the equa­to­rial guinea is go­ing to of­fer stakes in oil blocks to in­dia, and en­gi­neers in­dia ltd (eil) has been work­ing as a con­sul­tant to al­ge­rian na­tional oil com­pany sonatrach for over past 25 years. al­ge­ria is a ma­jor oil ex­porter to in­dia. The grow­ing in­ter­de­pen­dence be­tween in­dia and african states in the pe­tro­leum sec­tor is shaped by the fact that african states have re­sources but no tech­nol­ogy. in con­trast, in­dia has no re­sources but it can con­trib­ute to the hy­dro­car­bon sec­tor through tech­nol­ogy, ca­pac­ity build­ing, hu­man re­source de­vel­op­ment, en­vi­ron­men­tal sus­tain­abil­ity and even gen­er­a­tion of em­ploy­ment. With the ‘Make in in­dia’ pro­gramme, oil-rich states in africa such as south su­dan, su­dan, Nige­ria, an­gola, equa­to­rial guinea and gabon from sub-sa­ha­ran africa and North african states in­clud­ing al­ge­ria, Tu­nisia and Morocco are go­ing to be in­creas­ingly rel­e­vant to in­dia.

Do­mes­tic so­cio-po­lit­i­cal com­plex­i­ties in Africa

un­sur­pris­ingly, in the process of ne­go­ti­at­ing deals with such states in­dia’s pol­i­cy­mak­ers have al­ways had to en­counter com­plex do­mes­tic so­cio-po­lit­i­cal sit­u­a­tions in each one of th­ese states. For in­stance, the wave of arab spring had rocked coun­tries like Tu­nisia, egypt and libya dur­ing 2011. in con­trast, the oil-rich states in sub­sa­ha­ran africa have been in­trin­si­cally multi-eth­nic and rid­den with fac­tional wars and civil strife. an­gola wit­nessed civil war from 1975 to 2002 and the un­di­vided su­dan was locked up in al­most in­tractable civil war for decades till south su­dan be­came free in 2011. ir­re­spec­tive of th­ese un­favourable do­mes­tic con­di­tions for in­vest­ments, ovl be­gan its ven­tures in su­dan in 2003.

in su­dan, it started ini­tial in­vest­ments of $750 mil­lion with 25 per­cent stakes in greater Nile Pe­tro­leum op­er­a­tion com­pany and col­lab­o­rated with the chi­nese, Malaysian and su­danese com­pa­nies to ex­ploit oil. The pre­vi­ous Na­tional demo­cratic al­liance (Nda) regime over­looked op­po­si­tion to in­dia’s in­vest­ments in su­dan from hu­man rights ac­tivists and the left par­ties. By now in­dia has de­vel­oped stakes in the oil sec­tor of south­ern su­dan as well as Su­dan. Its ini­tial ef­forts, in­clud­ing help­ing to build an oil pipe­line pro­ject of 741 km worth $200 mil­lion from Khar­toum to the Port su­dan, and sub­se­quent at­tempts to main­tain cor­dial­ity of ties with su­dan as well as south su­dan have started pay­ing div­i­dends grad­u­ally in terms of boost­ing in­dia’s en­ergy se­cu­rity. sim­i­larly, an­gola is the sec­ond largest oil pro­ducer in africa with the third largest oil re­serves. it is the sec­ond largest oil ex­porter to in­dia af­ter Nige­ria. ovl tried to en­ter into an agree­ment to ac­quire a deep water off­shore oil­field for $600 mil­lion in an­gola but the chi­nese com­pa­nies trumped in­dia’s en­deav­ours.

In­dia and its com­peti­tors

Nev­er­the­less, in­dian pub­lic and pri­vate com­pa­nies are not func­tion­ing in iso­la­tion and they are con­strained to meet the chal­lenges as well as con­sis­tent com­pe­ti­tion from us-based gi­ant oil con­glom­er­ates as well as from transna­tional oil firms of China. The ag­gres­sive and ex­pan­sion­ist role of china in the pe­tro­leum sec­tor, with a strong back­ing from the state, has led to its over­ar­ch­ing pres­ence in africa in ev­ery other eco­nomic, com­mer­cial, busi­ness and even ed­u­ca­tional ac­tiv­ity. in­dia can hardly op­er­ate in africa on the same scale as china. even though china’s oil firms are out­per­form­ing those of In­dia, in­dia has steadily carved out a space on the oil scene in africa. While the african states are ap­pre­hen­sive of china’s im­pe­rial ten­den­cies, in­dia en­joys more good­will than china which could be used to strengthen its pres­ence in the oil sec­tor in africa.

PM Naren­dra Modi with for­eign del­e­gates at the 52nd African De­vel­op­ment Bank An­nual meet­ings, in Gand­hi­na­gar on May 23.

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