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Millennium Post

Tracking the oil rush in Africa

Indian and African nations have over the years developed a strong and mutually beneficial association. The ties date back to the colonisation era when India and Africa shared a common past. Building on strong ties and mutual development initiatives, the trade between India and Africa has grown significantly in the past decade. India’s economic partnership with African countries has extended beyond trade and investment to technology transfers, knowledge sharing, and skill-development.

In the present day scenario, India and Africa share complimentary needs with India having to import close to 80 per cent of its crude requirement and many African nations, being rich in oil and gas, are significant crude exporters.


ROLE OF INDIAN GOVERNMENT


India is the world’s 4th largest oil importer with oil and gas constituting 45 per cent of the country’s primary energy basket (oil 35 per cent and natural gas 10 per cent). About 80 per cent of India’s petroleum consumption is met from crude oil imports, while about 25 per cent of natural gas consumption also comes from imports. To meet this growing demand for crude oil and gas in India, Africa is expected to play a major role in the years ahead as both the eastern and western parts of this continent is endowed with enormous hydrocarbon reserves. India has been following a policy of consciously diversifying its sources of crude oil imports so as to reduce its dependence on any particular region of the world. Against 22 million tonnes in 2004-2005, India’s crude oil imports from Africa has risen to 35.3 million tonnes in 2010-2011, which is 21.5 per cent of India’s total oil imports. IWith Africa’s economic development picking up momentum and its energy demands increasing, India is also poised to become a dependable supplier of petroleum products to Africa.

The government has advocated policy support at various levels for enhanced engagements between India and the African nations. In the hydrocarbon sector, the ministry of petroleum and natural gas in collaboration with FICCI, has initiated the India-Africa Hydrocarbons conference as an institutional mechanism with the objective to foster bilateral trade relations in the hydrocarbon sector, understand policy and regulatory frameworks and offer opportunities for investment in upstream and downstream sectors.


OIL AND OUR OVERSEAS INVESTMENT POLICY


The government is encouraging National Oil Companies (NOCs) to aggressively pursue equity oil and gas opportunities overseas. ONGC’s wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 28 oil and gas projects in 15 countries, i.e. Vietnam, Sudan, South Sudan, Russia, Iraq, Iran, Myanmar, Libya, Cuba, Colombia, Nigeria, Brazil, Syria, Venezuela and Kazakhstan. Over the years ONGC/OVL has invested and worked in many African nations like Tanzania, Tunisia, Egypt, Cote d’Ivoire, Republic of Congo (Brazzaville), Nigeria-Sao-Tome JDZ and continues to be present in Sudan, South Sudan, Nigeria and Libya. ONGC/OVL is seeking more avenues of cooperation through interactions at government level, industry level and company level to concretise specific projects where in ONGC can partner federal governments and NOCs. In addition to OVL, there are several other Indian oil companies that have gone overseas for oil and gas projects. Indian companies and the government can proceed on a multi-pronged approach to increase the synergy. Through crude imports and equity oil and gas India can expand the share of India’s energy needs being sourced from Africa and in the process we can look at avenues for investment in allied sectors and newer avenues.


HELPING BUILD PHYSICAL INFRASTRUCTURE


One of Africa’s biggest challenges is building physical infrastructure to support development and to facilitate the flow of goods and services between individuals, firms, and governments. It is a known fact that western donors and investors have long neglected investment in Africa’s infrastructure. The trend has changed of late, and the credit should go Chinese companies for long term and credible investment infrastructure development in Africa. India is also seeking cooperation in capacity building in Africa through human resource development, transfer of technology, research and development.


RESOURCE NATIONALISM AND FUTURE PLANS


With the spiralling cost environment and inclination towards resource nationalism, it is becoming increasingly difficult to take up large-scale exploration risks in frontier areas like ultra-deepwater; pre-salt reservoirs; LNG projects etc. which involve cutting-edge technology and large-scale investment. In order to address these new resource areas, an increased thrust in exploration and development is required to be put in by all stakeholders. It is therefore imperative that entry barriers be lowered by African nations to encourage experienced E&P NOCs like OVL, who are open to mutually beneficial partnerships and shared visions of the host country.

With inputs from industry experts
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