India–Africa Oil Partnership in the New Millennium

Asymmetry and India–Africa Relationship

Asymmetry in the relationship between India and the states in Africa operates at two levels. The first level can be perceived at the broader level India, on one hand, and the continent of Africa, on the other. In terms of general economic, military, demographic and technological capabilities, India is stronger and is in a position to assist weaker states in Africa. India’s ever increasing developmental assistance for Africa as also initiatives to promote commerce and investments and security assistance signify such an asymmetry. Along with the growth of India’s capabilities over the years, India’s overall assistance to Africa has also gone up proportionately. Eventually, assistance to Africa is expected to contribute towards development of states in Africa and in effect reduce the asymmetry in the Indo-African ties. Yet at present, donor–recipient nature of Indo-African ties indicates and further reinforces the asymmetry already existing in the relationship.

The second level of asymmetry exists in case of India–Africa oil relations. Even though, oil and gas trade is a part of the broader relationship, it has assumed increasing importance in the new millennium. In the case of oil, India–Africa ties exhibit consumer–supplier relationship. India is a major consumer and Africa is an important supplier of crude oil. In the context of oil-related import–export relationship, asymmetry is a function of oil prices prevailing in the international market. Global prices of oil determine who is dominant and who is dependent. For example, when oil prices are higher, major consumer and importing states like India depends on oil producer states of Africa. But the balance is reversed when oil prices fall. Falling prices make oil supplier states more dependent on consumer states for continued oil exports. Thus if a single significant strategic resource is taken into account such as oil, Africa was relatively in a dominant position during the decade of 2004–2014 when oil prices remained high. During the post-2014 phase, falling oil prices have increased the importance of India for oil producer states in Africa. It has allowed India to leverage its oil imports for signing better deals with Africa’s oil producer states.

Within the oil-related activities, India’s growing technological capabilities and Africa’s relative weakness in technology creates another layer of asymmetry. India imports crude oil from Africa and exports refined petroleum products to Africa. Africa’s rising middle classes and economic growth require refined petroleum products and yet the continent lacks adequate refining capacity. Meanwhile, on account of technological and commercial capabilities of state-owned and private sector oil companies, India has emerged as a major exporter of refined petroleum. India’s geographic closeness and increasing capacity to supply refined petroleum makes it a valuable partner for African states. Hence, elements of asymmetries as well as complementarities exist in the overall relationship. Keeping this in view, the present article builds on the asymmetric as well as complementary nature of India–Africa oil relationship.

In fact, India’s engagement with oil-rich states in Africa has grown considerably at the level of government and private sector. To facilitate India’s growing interests in oil sector, India’s foreign policy has been geared to build mutually beneficial partnership with Africa. In this context of mutually beneficial ties, India’s efforts to engage with states in Africa in the oil sector need a fresh appraisal that offers a historical–empirical analysis of the relationship concerning the oil sector. Further, it is equally essential to look at India’s penchant to acquire greater oil supplies and increased participation in Africa’s oil sector. In the subsequent sections, it would be equally important to note difficulties that had held back the full realisation of potential in the relationship.

India’s Oil Scenario

In India’s energy mix, the role of oil has always been important. Oil forms the backbone of domestic transportation industry and is required for military uses. India relies on oil imports to meet growing domestic demand. In 1990, India imported about 42 per cent of its oil from abroad. Owing to its speedier economic growth and even mounting oil consumption, by now India imports more than 70 per cent of its demand from foreign suppliers (EIA, 2016). It is expected to go up to about 90 per cent by 2040. India’s oil imports account for close to 33 per cent of its overall imports since 2011 and has cost around US$135 billion annually. By 2030, India’s import bill would reach up to US$300 billion and by 2040 US$480 billion. Hence, any fluctuation in global oil prices has and will have serious implications for India’s oil security and import bill (IEA, 2015).

Evidently, India’s heavy dependence on external oil suppliers provides a viable context to analyse the relationship between India and oil-rich states. West Asia remains the most important major source of oil for India. In 2014, the region supplied close to 57 per cent of total oil imports, whereas Africa supplied around 18–20 per cent oil (IEA, 2015). However, the importance of Africa is steadily increasing as a supplier of oil for India’s market. India’s companies are planning to increase oil imports from Africa due to high quality of African crude. In 2015, for India, the largest African oil producer, Nigeria’s share was 11 per cent. Saudi Arabia, Iran, Iraq and Venezuela are other important sources of oil for India (EIA, 2016).

Any political upheaval, war or domestic turmoil in any of these major states that supply oil affects India’s economy and oil security. Example of India–Iran energy relations is instructive here. India had to cut down imports of Iranian oil during 2011–2015 as international sanctions were placed on Iran for pursuing nuclear ambitions. Nevertheless, India’s oil imports have picked up since 2015 after the signing of nuclear deal between Iran and the global powers. Iran is now regaining pre-sanctions position in India’s oil basket.

On account of such an excessive dependence on external sources of oil, India’s quest for energy security assumes international dimensions (Mezard, 2014). India cannot rely on any one particular state or region for its domestic oil supplies. Hence, India has been diversifying its sources of oil. For example, in 2009–2010, India had imported oil from almost 50 countries, up from 35 in 2006 (Sharma & Ganeshan, 2011). In the pursuit for diversifying oil supplies, the role of oil-rich states in Africa is important. As a result, India is purposefully engaging with oil producer states in Africa like Angola and Sudan to ensure assured supply of oil at a reasonable price. After outlining India’s oil scenario, we shall proceed to take a closer look at Africa’s oil potential and prospects.

Africa’s Oil Profile

In the new millennium, Africa has emerged as an important player in the global petroleum market/politics. Several African states have emerged as the prospective sources of oil and are seeking foreign investments in their petroleum sector. Oil companies from the West and from Asia are actively engaged with Africa, building partnerships and investing in their petroleum sector. India is no exception.

While discussing Africa and its oil potential, the continent should be divided into three major geographical regions. First, there are North African oil producers like Libya and Algeria that have been producing oil for the past several decades and are more connected with the politics of the West Asian region. Second, there are emerging and existing oil producers in the West and Central Africa and the Gulf of Guinea region. They include states such as Nigeria, Equatorial Guinea and Gabon. Southern African oil producer like Angola could be included in this list. Several states in this region hold untapped oil potential and have attracted international focus in the new millennium. Third, there are potential oil producers in East and Southern Africa like Kenya and Uganda who are now joining the oil game.

The oil from Africa is attractive to major consuming states of the world for several reasons. Africa has discovered major oil deposits in the recent past. In contrast, the other parts of world have not been able to bring any major oil pro-specting field till the North American shale oil came online. Since 2001, political instability, regional conflicts and threat of terrorism have increased the risks of dependence on West Asian oil supplies. Another significant factor was that the oil producers in Africa were welcoming foreign participation in the energy sector unlike those in West Asia. It was important from the point of view of India and China, both of whom were ready to invest abroad and were competing for opportunities in equity oil assets.

Geographic location increases attractiveness of Africa’s oil potential. West Africa is situated closer to the USA and Europe. Unlike West Asia, there is no threat of blockading of chokepoints while shipping oil from West Africa. In addition to this, high quality of African oil is also a factor. African oil is sweet which means it has lesser sulphur content and need lesser efforts for refining. All of the aforementioned factors have increased attractiveness of oil sector of Africa for external players. Although, Western oil companies were present in oil sector in Africa, major oil producers like Nigeria and Angola were interested in diversifying their oil partners. Therefore, they sought to bring in Asian oil companies from India, China and Malaysia (Vines, Wong, Weimer, & Campos, 2009).

In 2001, out of 8 billion barrels of oil discovered worldwide, 7 billion barrels was in the Gulf of Guinea region. Overall sub-Saharan Africa holds 7 per cent of total world’s conventional oil resources while in case of natural gas; it has 6 per cent of world gas resources. As of 2013, sub-Saharan Africa holds 200 billion barrels of oil reserves. Out of which, Nigeria contains the largest reserves estimated to be about 63 billion barrels. Angola, Gabon and Congo hold significant reserves as well. In East Africa, South Sudan, Kenya and Uganda contain significant oil reserves (IEA, 2014).

Out of total oil and gas discoveries worldwide in the last 5 years, sub-Saharan Africa accounted for 30 per cent of it. Although, states such as Nigeria, Angola, South Sudan (and Mozambique) are considered important for their oil (and Mozambique for gas) reserves, in the new millennium, there are other 10 states that have discovered significant oil and/or gas reserves. Out of these states, Ghana, Chad and Equatorial Guinea have started production of oil, whereas Kenya and Uganda are in the process of extracting their reserves. Yet, in spite of these oil producers and foreign attention, Africa’s oil production is expected to reach its peak by 2040. Rather as several African oil producers are finding and extracting oil, Africa will continue to produce more oil in the next three decades (IEA, 2014). However, it needs to be noted here that engagement with African oil is fraught with risks on account of the unstable domestic politics in African states that are more often plagued by civil wars. Civil wars in their turn are intricately connected to oil-related politics. Even in the new millennium, domestic stability for many African states is a challenge.

Major oil producers in Africa have faced significant challenges in continuing and increasing their oil production. It has been observed that oil wealth has led to civil wars, ethnic conflicts and general instability in many countries. Nigeria, Sudan and South Sudan are prominent examples of instability fuelled by oil resources. Africa’s petro-states and politics related to petroleum resources and revenues have not contributed in the development of the Africa’s states (Beri, 2005). Having taken into account India’s dependence on external oil sources and Africa’s oil potential, it will be easier to grasp India’s petroleum and foreign policy–related efforts to pursue oil in Africa.

Engaging Africa in the New Millennium

During the Cold War phase, Indo-African ties were built on anti-colonial, anti-racial solidarity. India’s policy towards Africa began to change after the end of the Cold War and the advent of economic reforms in India. In the new millennium, India–Africa relationship is now expanding rapidly in the economic, energy and politico-security spheres (Dubey, 2011). Developmental assistance has been one of the major factors in India’s relations with states in Africa. In the new millennium, developmental co-operation has remained in place. It is rather expanding in the changing era of India–Africa relations (Mullen & Arora, 2016). India’s economic reforms and subsequent economic growth have expanded India’s interests in Africa. Many states in Africa are resource-rich and are willing to supply necessary raw materials, strategic minerals, energy resources like coal and oil to India. Geographically closer location, just across the Indian Ocean, reduces transport costs for India’s oil and coal imports from states like Angola and South Africa. Several Indian private sector companies, such as Airtel, Tata, Mahindra, Bajaj, Kirloskar, etc., have focused on Africa as their major destination for investments and exports. Along with these major companies, several small and medium-sized Indian firms have turned to Africa (Chakrabarty, 2017). India’s growing interests in oil-related engagement with states like Nigeria are part of this increasing economic focus on Africa.

Asymmetric and yet complementary nature of India–Africa ties is reflected in India’s systematic efforts to build relations with Africa in general and in oil sector in particular. India is emerging as an important consumer for oil from Africa. It has emerged as a major source of refined petroleum for many states in Africa. India’s overall relationship with Africa facilitates engagement in oil sector and oil-related engagement with Africa strengthens India’s partnership with Africa’s states in other sectors. As a result, oil-related activities act as an input and output, both, in Indo-African ties and function as a strengthening factor in the relationship.

Although, in the past, India imported oil from Africa’s major producer states like Nigeria, India had never owned, participated or managed any major oil-producing asset in Africa. In the new millennium, India realised that equity oil assets would be useful in bolstering India’s quest for energy security. Around 2002–2003, Sudan presented India with an opportunity to participate in its oil sector. Sudan was then engulfed in the civil war and large investments in such a country were fraught with obvious dangers. Keeping ever increasing energy interests in mind, India decided to invest in Sudan. Even after the participation in Sudanese oil sector since 2002–2003, India did not make any major push immediately for acquiring equity oil from other states in Africa. In the meanwhile, India continued to engage with Africa in economic and political spheres.

In 2002, India launched ‘Focus Africa’ programme to ‘give boost to India’s trade’ with major countries in sub-Saharan Africa, such as Ethiopia, South Africa and Kenya. Nigeria, an oil-rich state, was included as well in the first phase of the programme. The programme was further extended in April 2003 (in the wake of Second Iraq war) to include other important states, such as Angola, Ivory Coast, Libya, Sudan and Algeria. Many of these countries are oil-rich. The programme was initially supposed to include states from sub-Saharan Africa but North Africa was added later for trade and energy potential (PIB, 2002).

Moving further, in 2004, India launched ‘Techno Economic Approach for Africa–India Movement’ better known as ‘TEAM-9’, an initiative that covers eight (seven Francophone and one Anglophone) states from West Africa. The initiative was launched to ‘envisage special co-operation’ with these states. India had not paid sufficient attention to francophone African states till the launching of TEAM-9 initiative. Among the TEAM-9 participating states, Chad, Cote d’Ivoire and Equatorial Guinea are well known for their oil potential (Pathak, 2007).

In addition to these initiatives, India hosts biennial ‘Petrotech’ conference for facilitating a dialogue between key policymakers and experts in the field of petroleum. In 2005, 2007 and 2009, India’s then foreign ministers had addressed this conference and highlighted obvious connections between India’s foreign policy and oil security. For example, in 2005, India’s foreign minister Natwar Singh spoke of a ‘close and symbiotic relationship’ between ‘long term interests of the country and concern for our energy security’. He specifically mentioned how the work of foreign and petroleum ministries get coalesced in the oil diplo-macy and the potential of African states for ensuring India’s increasing oil imports. The main challenge for India in relation to Africa remains in converting traditional goodwill for building a durable energy relationship between the India and Africa (Singh, 2005). In 2016, India hosted 12th Petrotech conference (PIB, 2016a).

Building on these three initiatives, India launched India Africa Hydrocarbon Conference (IAHC) in 2007 for engaging with Africa in the petroleum sector. The IAHC has so far been organised four times (in 2007, 2009, 2011 and 2016). First IAHC was attended by 25 African states (Sundareshan, 2009). The purpose of IAHC is to ‘foster bilateral trade relations in the hydrocarbon sector, understand policy and regulatory frameworks and offer opportunities for investment in upstream and downstream sector of the two regions’ (PIB, 2011). In 2011, while addressing the third IAHC, India’s then finance minister Mr Pranab Mukherjee pointed out ‘the beneficial synergy that can be created between Africa and India’. He also spoke of the IAHC as ‘a forum to take forward our partnership in the energy sector’. By 2010–2011, India was importing 35 million tons of oil from Africa as compared to 22 million tons in 2004–2005. Nigeria, Angola, Sudan, Algeria, Cameroon and Equatorial Guinea had emerged by then as major suppliers of oil from Africa to India (Mukherjee, 2011).

After IAHC, India’s engagement with Africa was taken a step ahead with the launch of India Africa Forum Summit (IAFS) in 2008. The IAFS had held three summits so far. IAFS-I was organised in 2008 in New Delhi and India had invited African states based on the Banjul formula (Haider, 2015). According to Banjul formula, African Union (AU) would decide members for participation in such multilateral summits from eight African regional organisations and New Partnership for Africa’s Development (NEPAD) founder members. Similar logic was followed in selecting IAFS-II participating states held at Addis Ababa (Ethiopia) summit in 2011. For making engagement with Africa more broad-based and participatory, India changed strategy and invited all states from Africa for IAFS-III held at New Delhi in 2015. The IAFS-III proved to be the largest summit ever organised by India with African states. For India, IAFS serves the purpose of creating a comprehensive framework for engaging with Africa in general and its oil sector in particular.

India’s strategy of engaging with Africa and specifically deepen oil relationship has been an all-round effort at the level of government. Trade and Commerce, Petroleum and Natural Gas and External Affairs ministries have played their part in organising these large, Africa-focused summits. They have had a role in implementing proposals to improve Indo-African ties. For example, ‘Focus Africa’ is a Commerce ministry effort, whereas Petroleum Ministry organises ‘IAHC’ and ‘Petrotech’. The ‘IAFS’ is organised by the Ministry of External Affairs (MEA). State-owned, public sector oil companies are part of this process. These companies, many times, have implemented government’s agenda or followed government’s policy direction in spite of no apparent financial profits in the near term.

Building on these initiatives from ‘Focus Africa’ to ‘IAFS’, in energy, trade and foreign policy spheres, and with regular, bilateral level engagement, India has carved out a foothold for itself in the oil sector in Africa. India’s oil companies are now actively working with oil-rich states of Africa in their upstream and downstream sectors. Their activities and presence are being keenly watched and welcomed by the African states.

India–Africa Oil Partnership

In general, India’s oil partnership with African states has achieved moderate success. Sometimes, India has lost out to oil companies from China or other Asian states in the race of acquiring equity oil assets. Nevertheless, India’s oil imports from African states are rising continuously. India’s relations with major oil supplier states like Nigeria and Angola have been strengthened by oil-related engagement. States, such as Chad, Equatorial Guinea and Gabon, on account of their oil potential, have entered into India’s oil strategy. India’s oil engagement with states from Africa has not been limited to just importing oil. India had built oil-related infrastructure like pipelines. India had promised to construct refineries and other supporting infrastructure for African oil-producer states.

It is pertinent to note that many African countries had sent their oil, energy or minerals’ ministers for the IAFS-III held in New Delhi in 2015. From India’s side, petroleum minister Dharmendra Pradhan was sent to invite important oil-producing states like Nigeria. During the IAFS-III, bilateral meetings took place between delegations from African states and India’s officials with an eye on oil sector. Both sides were interested in furthering the oil partnership. India’s potential as a large and growing oil consumer market and ability of many states from Africa to supply high-quality oil could be leveraged to further develop the relationship.

Many African states like South Sudan are highly dependent on the export of crude oil. Share of oil in their exports and national income is so high that any change in its price affects their fortunes, development plans and welfare of their citizens. Falling oil prices since 2014 has pushed states dependent on oil revenues towards the economic crisis. It is most visible in Nigeria (Fick, 2016). The role of a stable and growing oil market like India is important for oil-exporting economies from Africa. Therefore, in the era of lower oil prices, India becomes critical for the oil-rich African states.

Present Scenario

According to India’s Petroleum Ministry statistics, India owns equity assets in 24 countries around the world. India holds ownership and/or participating stakes in 49 exploration projects. Out of which, 11 assets are in Africa. India’s equity assets in Africa are in Sudan, South Sudan, Libya, Mozambique, Nigeria and Gabon. India is importing oil from many other African countries, such as Algeria, Chad and Angola. In these states, India does not own any equity assets. India had built oil pipeline in Sudan. India has signed agreements for cooperation in energy sector with Mozambique, Liberia and Sudan. In addition to the state-owned ONGC Videsh Limited (OVL), other state-owned companies like Oil India Limited (OIL) and Gujarat State Petrochemical Corporation (GSPC) are active in African oil and gas sector especially in Libya, Egypt and Gabon (Chakrabarty, 2017; MPNG, 2017).

India imported about 20 per cent or 787,000 barrels per day (bpd) from Africa in 2015. Increasing share of oil from Africa in India’s oil basket is accompanied with an ensuing reduction in the share of West Asia (Verma, 2016). However, increasing imports from Africa do not reduce the primacy of West Asian oil supplies in Indian energy security calculations. Africa offers India a chance to diversify oil supply options. From Africa’s side as well, India is increasingly emerging as a major player in the petroleum sector. India’s evolving oil interests in Africa could be analysed by outlining India’s oil relations with states, such as Sudan, South Sudan, Nigeria and Angola. In the following section, we outline these key oil engagements.

Sudan and South Sudan

India’s participation in Sudanese oil sector began in 2002–2003. Sudanese government had invited India to participate in the Greater Nile Oil Project (GNOP). Along with India, companies from China, Malaysia and Sudan had stakes in the consortium. Sudanese regime was then reeling under international sanctions on account of its civil war. India invested US$750 million in GNOP in 2002–2003 and picked up 25 per cent stakes in the project (Beri, 2010). Investment in GNOP was followed by India’s further acquisitions of oil assets in Sudan. As a result of these investments, India’s investment in Sudanese oil sector had reached US$2.3 billion (Mohan, 2016). Apart from investing in acquiring oil blocks, India built oil pipeline from Khartoum to Red Sea for transporting oil. Following these investments in oil sector, India’s trade with Sudan also grew rapidly during 2002–2007 (Ray, 2007). Since then, there has been no major investment and/or initiative in India–Sudan relationship. Demonstrating the importance of Indo-Sudanese ties, President of Sudan Omar Al Bashir, who faces International Criminal Court (ICC) warrant, attended IAFS-III (2015) in New Delhi.

Sudan had emerged as an important source of oil for China and Japan in the 2000s. However, India never imported major chunk of its oil requirements from Sudan. Even after investing huge sums of money, Sudan’s share in India’s oil basket remained low (Verma, 2012). Oil-related investments in Sudan were significant for India not from point of view of oil supplies. Indian policymakers and oil companies gained valuable experience of operating in difficult conditions. While acquiring stakes in GNOP, India was able to beat China in the oil game. India’s growing interest in Sudan sent an important signal to other oil-rich states in Africa that India was now prepared to engage seriously with Africa for promoting economic and energy partnership.

India had faced difficulties in Sudan on account of Sudan’s long running civil war. In 2011, South Sudan emerged as an independent state. Navigating the complex politics of Sudan and South Sudan, India was quick to establish relation-ship with the then autonomous Government of South Sudan (GoSS) even before separation for securing its oil interests. The separation of 2011 has put the Sudanese and South Sudanese oil industry and foreign investors like India in a peculiar dilemma because oil infrastructure, such as pipelines, refineries and access to sea are in Sudan, whereas majority of oil deposits are situated in the territory of South Sudan or on the bordering region between the two states. India’s oil assets lie on the region bordering both states. Less than cordial inter-state relations between Sudan and South Sudan and subsequent civil war in South Sudan have cast a shadow over the future of India’s investments. Peace and security are yet to emerge in these states (Burgess, 2016).

Post-separation, keeping in mind the energy interests and oil-related politics in Sudan and South Sudan, India had appointed a special envoy. Indian peacekeepers are also deployed in South Sudan as part of the United Nations (UN) peacekeeping efforts. Security situation in South Sudan had worsened to the extent that India had to rescue its citizens from the country in 2016. Although, India’s oil invest-ments have been trapped in the middle of the crises in Sudan and South Sudan, instability exists in other oil-rich states like Nigeria as well.

India and Other States in Africa

Among the oil-rich states of Africa, Libya, Algeria, Nigeria, Angola and many other smaller states in north, west and central parts of the continent were long known as oil producers. Western oil majors have been operating in these states for many decades. However, untapped oil in east and southern parts of Africa offers India a chance to enter into the oil and gas sectors. These countries are in the process of developing their oil and gas fields, oil industry and related infrastructure. Potential oil-producer states, such as Kenya, Uganda, Rwanda and Tanzania, and gas producer like Mozambique would offer India significant opportunities to engage with and develop their oil industry.

Among the new oil producers, in the West and Central parts of Africa, states like Chad and Ghana have now started producing oil. Cote d’Ivoire is also emerging as an oil-producer state. Indian Ocean island state of Madagascar holds potential for oil. Keeping this context of emerging opportunities in mind, we would be able to appreciate India’s oil partnership with states in Africa.

India owns four oil assets in Libya, one of which is jointly operated by Algeria’s national oil company and India’s oil companies. India is active in an oil field in the West African state of Gabon as well. In Mozambique, three state-owned Indian companies (OVL, OIL and BPCL) are active and are in talks with expanding their share (MPNG, 2017). In 2010, India was in talks with Uganda for developing oil assets in the Lake Albert region but lost out to a bid by Chinese company (PTI, 2013).

India had expressed its keenness to participate in the oil exploration in Equatorial Guinea. In 2007, India had emerged as the preferred bidder for oil blocks. But the deal could not materialise (MEA, 2016b). However, without any equity assets, oil imports from Equatorial Guinea contribute to the import basket of India. Algeria is another important oil producer in Africa. India does not own any asset in Algeria. Nonetheless, Algeria is a major oil partner for India. India’s private sector oil companies like Essar, Reliance and Sterling hold oil interests in many states in Africa. Essar and Reliance were in talks with a global oil firm BP for purchasing oil assets in east and southern Africa (PTI, 2010). Sterling holds interests in oil sector in Nigeria and has even started supplying oil for India’s state-owned refining company like HPCL (Ruperal, 2015).

Evidently, India’s oil activities are spread across the continent with a focus on further expansion. Apart from oil imports from Nigeria, Angola and equity assets in Sudan and South Sudan, India imports crude oil from Republic of Congo, Equatorial Guinea and Libya. India holds stakes in the oil sector of Chad (pipeline and technical support), Kenya (refining and retailing), Mauritius and the tiny Gulf of Guinea state of Sao Tome and Principe. India’s oil companies have explored possibilities of exploration in Cote d’Ivoire. India has established Joint Working Group (JWG) with Tunisia for oil and gas sectors. In case of prospective opportunities in future, there will be opportunities in the oil sector of Mauritania, Tunisia and Uganda.

It could be noted here that India is active in many states of Africa but the relationship is still evolving and is yet to reach full potential of cooperation. Complementary nature of Indo-African ties would benefit oil sector development in Africa. Oil-producing states in Africa lack the sophisticated technical knowledge that is required for the upstream and downstream sectors of oil industry. India is in a position to provide such assistance. India’s public and private sector companies could explore possibilities to invest in these sectors. However, there are significant challenges along the way.

The Challenges in India–Africa Oil Relationship

Although, India’s engagement with Africa’s oil producers has been growing steadily since the last decade, there were few setbacks to this burgeoning partner-ship as well. The unstable internal political conditions in Libya, Egypt and Sudan since 2011 have affected India’s planning towards ensuring energy security. Owing to the ‘Arab Spring’, Libya and Egypt underwent significant political changes that led to the replacement of political regimes in those states. In the process, their oil industries took the toll. Especially, Libya’s oil production has suffered and has yet to recover from the crisis (Rashed, 2016). Libya has always been one of the major producers of oil from Africa with significant proven crude oil reserves. Break-up of Sudan in 2011 and ‘Arab Spring’ induced political changes in Egypt have adversely affected economic development of these states. In case of Sudan and Libya, India was unable to limit the effects of political turmoil spilling over onto the oil sector.

In other parts of Africa, many states have faced and even now are facing severe problems arising out of excessive dependence on oil wealth. More often than not, oil has been proven as a curse for African societies and fuelled conflicts over the control of oil wealth and sharing of benefits, thus generating the phenomenon of resource-related liability. Sudan is a good example of such resource-related liability. As soon as oil was discovered in the southern region in the 1980s, Sudanese government went back on the promise of autonomy for the southern region. It even used military force to cleanse the area for oil extraction. Upon facing resistance from local rebels, Sudanese state launched brutal counter insurgency campaign against southern rebels. Similarly, in Nigeria, oil-related activities have played a key role in fuelling instability in the oil-producing southern parts.

Oil-producing regions of Nigeria have been destroyed by the activities related to oil exploration. As a result, local societies have been facing the brunt of environ-mental destruction. Along with the environmental damage, widespread corruption, political complexity and absence of any effective regulatory mechanism make oil investments a very high-risk venture in Nigeria. Rise of local militant groups in the oil-rich Niger delta pose a serious security threat to the onshore oil extraction and production activities. Therefore, oil companies prefer offshore assets that are away from the mainland. Offshore assets are expensive and require significantly more investments to extract than onshore oil extraction (KPMG, 2014).

There has been local opposition in many African states to bring in foreign oil companies for extraction. Local groups believe that resources should be controlled locally and should benefit local population more than foreign oil companies. This phenomenon of ‘resource nationalism’ makes it difficult for international oil companies to operate competitively in the African setting. Connection of oil industry with the oppressive regimes, violation of human rights and environmental degradation is also part of the difficulty.

Competition

India’s engagement in oil sector in Africa faces the challenge from Asian and the Western oil companies. Historically, Western oil companies have dominated oil sector in Africa. For example, in Nigeria, companies like Shell-BP and Chevron occupy large space in the oil sector. In Angola, Chevron, Exxon Mobil, Total and BP, among others, are active. At present, major Chinese oil companies like CNPC and Sinopec are holding assets in Africa (Frynas & Paulo, 2007). India is exploring possibilities amidst this milieu. It is well documented in news reports how Chinese oil companies have beaten India in Angola, Nigeria and Uganda.

Post-2001, the USA’s dominance on African oil sector was complemented by the emergence of Africa as a priority supplier of oil. In the wake of September 2001 terror attacks, the USA was reducing excessive dependence over oil supplies from West Asia. Oil-rich states of West-Central Africa were instrumental in this strategy. The USA was the largest buyer of Nigerian crude till recently and is now replaced by India. In case of other major oil player in Africa, China, it was able to engage oil-rich states in Africa with greater financial ability and dynamic decision-making. Chinese companies were aggressively seeking oil assets in Africa. Commercial viability and actual cost of asset did not seem to bother China. Chinese state-owned oil companies offered lucrative infrastructure deals along with their oil bids. Using its veto, China is able to protect regimes from UN sanctions. It was a factor in favour of China’s engagement with resource-rich states in Africa like Zimbabwe and Sudan. Chinese state-owned oil companies were active in Sudan. To protect its oil interests, China provided cover for Sudanese regime in the UN during the Darfur conflict (2004–2008).

India found itself competing against Chinese companies in many states in Africa and had lost out in the competition. In spite of signing agreement with India to co-operate in oil sector in 2006, China has continued to compete and surpass India across the globe including in Africa (PTI, 2013). Chinese companies had played the oil game better. They were not constrained as Indian companies were due to limits on finances and issues like commercial viability. India–China competition in Africa resulted in rising costs of oil assets in Africa. In addition to this, higher oil prices in 2004–2014 period pushed prices of oil assets even further than their normal cost.

While beginning the oil game abroad, in the new millennium, India lacked sufficient experience in bidding, acquiring and operating oil assets in far away and difficult regions like Africa. India’s companies were late starters in the game and had difficulties in offering attractive oil and infrastructure-related deals. They were new players in the oil game and were successful where the host government like Sudan wanted Indian investments in oil sector (Carl, Rai, & Victor, 2008). Even then, India’s companies have faced difficulties in operating in Africa. India’s unsuccessful bids in acquiring some assets in Nigeria and Sudan are good examples of the same. Compared to the Chinese and the Western oil companies, Indian companies’ financial and technical capabilities remain weak. Slower decision-making and state-control over major oil investments have affected India’s competitiveness in oil sector of Africa. While bidding for oil assets, India’s approach was to invest in commercially viable assets than just participating and controlling oil production in a number of countries. As a result, India is yet to perform at its full potentials in the bidding rounds in oil sector in Africa.

Conclusion

The nature of relationship between India–Africa has been simultaneously asymmetric as well as complementary. Difference between technological, economic, military and demographic capabilities of India, on one hand, and Africa, on the other, have led to queer mélange of asymmetries as well as complementarities. India is an oil-importer country, whereas Africa is an oil-exporting region. India’s capacity to supply refined oil facilitates Africa’s consumption requirements. In this oil relationship, India and Africa gain and loose at different period of time depending on the global oil prices. Higher oil prices put India at a disadvantageous position, whereas lower oil prices are not beneficial for oil producing and exporting states of Africa.

By and large, Indo-African oil relations have witnessed steady progress and gradual expansion. Although, India has lost out on acquiring several equity oil assets, it has absorbed large quantities of oil imports from Africa. India has designed specific policy measures and programmes like IAHC and IAFS to engage with Africa in general and African oil sector in particular. In all likelihood, India’s rising oil demand and quest to diversify oil basket, geographically, will further strengthen of India–Africa oil relations.

Twin challenges of navigating the difficult political terrain in states in Africa and facing stiff competition from the global oil players like China have not been easy for any state to negotiate. Considering this, India’s record of forging good relations with most of the oil producers in Africa and acquiring assets in some cases could qualify as a success, albeit a moderate one. A case could always be made for more success and better relations with African oil producers. India’s politico-diplomatic relationship with Africa and its oil activities are complementing each other. Hence, it is with a great interest that India’s next moves in Africa will be watched the world over.