A peep into energy ties
Delhi is increasingly looking towards the continent to meet its growing hydrocarbon demand
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.