India offers $1 bn sweetner for oil deals
India is offering credit for power projects, railways, refineries to West African nations, to ensure oil supplies.india Updated: Nov 24, 2005 15:14 IST
India is offering credit of up to $1 billion to build power projects, railways, refineries and even stadiums in oil-rich but poor West African nations, as it seeks to quench its growing thirst for foreign oil.
India, which imports 70 per cent of its crude, has devised a multi-pronged strategy to ensure future oil supplies from overseas oil and gas properties. While political weight has been key, India is now also offering financial and industrial assistance.
"India has decided to offer lines of credit up to $1 billion on a government-to-government basis to these countries for infrastructure projects in exchange of oil exploration rights," Talmiz Ahmad, a senior India oil ministry official said. "West Africa is a long-term investment destination for India."
Ahmad said India will offer commercial partnerships and joint ventures to a group of African countries in oil, roads, railways, IT, power and ports under the partnership development initiative.
"This model is definitely worth pursuing," he said, noting the Africans now seem to realise the spoils of their oil should go into infrastructure instead of the pockets of oil majors.
A $6 billion infrastructure investment deal struck in Nigeria this month by ONGC Mittal Energy Ltd, a joint venture between India's state-run Oil and Natural Gas Corp Ltd (ONGC) and the world's largest steel maker, Mittal Steel, is seen as a major breakthrough in this strategy.
The offer to the only West African member of the Organization of the Petroleum Exporting Countries, in return for exploration blocks, could not be refused because Nigeria needs more foreign investment in its decayed industrial base.
"The ONGC deal is just the beginning of India's entry into West African oil exploration," Ahmad said.
India will now look to a group of eight West African countries in a special cooperation model called the Team-9 initiative, under which India offers credit for projects set up by Indian companies through the Export Import Bank of India.
Team-9 countries include Burkina Faso, Chad, Ivory Coast, Equatorial Guinea, Ghana, Guinea-Bissau, Mali and Senegal.
Ahmad said Sao Tome, Niger, Democratic Republic of Congo and Congo Brazaville would also be approached by India.
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Financial assistance for infrastructure is an important aspect of any oil deal with developing African countries, ONGC Chairman and Managing Director Subir Raha said.
ONGC's presence in Sudan's Greater Nile project enabled it to build a $259 million pipeline from the port to the oil production facility and then transfer it to the Sudanese government, he said.
"This project is probably the best example of what ONGC can do if it is given an opportunity in any country," Raha said.
ONGC has also built a stadium in Sudan to help resurrect the game of soccer for people in the strife-torn country.
Financial assistance is not new in the oil industry, but India's willingness to offer such help to countries that struggle to secure credit privately is a positive step, said Praveen Martis, an analyst with British consulting firm Wood Mackenzie.
"These kinds of assistance are no doubt helpful. The Chinese have been doing it in countries like Sudan and Kazakhstan, where they have a substantial oil equity investment in the region, for quite a while now," Martis said.
"There is a risk factor in this, but it could be worth it if it helps Indian oil companies in strengthening relationships with the host countries and, in turn, offering a better chance in securing assets in these countries," he added.