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Interaction | July 2015

India needs to explore the hydrocarbon space of Africa

With 19 African countries discovering oil and gas reserves which can suffice the global need upto 25 years, Indian companies, due to geopolitical situation in African region, have taken cautious steps. But if India wants to outnumber China, which has a major presence in the African continent, the country must be bold feels, Sunanda Rajendran, Secretary General, Indo-African Chambers of Commerce and Industry.

Can you explain Indo-African Chamber of Commerce´s role in creating business opportunities, especially in the hydrocarbon segment for Indian companies? Indo-African Chamber is a bilateral chamber which promotes India´s international trade to various African countries. Our main objective is to help Indian companies gauge their scale of preference and requirement to remove obstacles as far as business is concerned. Here, the chamber plays a dual role, where we let the African countries understand the requirement from Indian companies and vice-versa.

The requirements, can broadly cover the need of the African countries for skill development, technology transfer, etc. In return, African nations offer their abundant resources, which can be explored by Indian companies along with a joint venture partnership with African private players or government units on a public-private-partnership mode. Currently, Indian companies are looking to tap sectors such as oil and gas, power, renewable energy, etc.

Africa is known as the land of untapped potential. It has incredible natural resources - oil and gas. For a rapidly developing nation like India, which is eyeing an almost nine per cent growth rate, Africa is a much desirable market for the growth of the Indian companies.

It sounds interresting that India can leverage opportunities in the O&G sector in Africa...
As far as oil and gas sector is concerned, around 19 African nations have discovered reserves, which can serve the global need for a period of 25 years. At present, African countries like Sudan, Chad, Mali, Kenya, Uganda, Ghana, Algeria and Angola present promising opportunities for Indian companies in this sector. Now Angola, which joined OPEC in 2007, is claiming to be a big threat to one of the largest oil producing countries in the African continent-Nigeria. Here, Indian companies are exploring drilling activities, constructing pipelines, setting up storage facilities and refineries in joint venture with African companies. In a latest development, Indian auto major, Bajaj Group in a JV with a private player is setting up a refinery in Ghana, where most of the technological transactions will be from Bajaj.

Meanwhile, such partnerships need to reach more African countries and West Africa in particular, with a specific focus on oil and gas. India currently imports 75 per cent of its oil and this dependence is projected to rise to 90 per cent by 2020.

India hopes to gain access to the African oil and gas resources- the continent currently has 9.5 per cent of the world´s reserves- as well as diversify its oil sources. India has invested in oil projects in various countries like Sudan, Nigeria, Libya, and Egypt. The total capital outflow to the African nations from India is around $150 billion, of which 10 per cent is attributed to oil and gas. India is also interested in minerals, coal, precious metals, and other natural resources to support the expanding Indian economy.Here, we are in association with the government of India, which is especially organising a seminar this November, on the oil and gas sector, and representatives from around 36 African countries will participate. This seminar will help Indian companies showcase their ability and capability to these African countries in hydrocarbon space. To be honest, this is the first attempt made by any Indian government to gain access to Africa´s oil and gas sector. Companies such as ONGC, Indian Oil, Bharat Petroleum, Hindustan Petroleum as well as Indian private companies have already expressed their interest in drilling and oil exploring operations.

How successful have Indian companies been in Africa since expanding there?
Yes, there are many who want to explore opportunities in the African continent but I won´t be able to divulge details on it. Meanwhile, the African continent has been grappling with many challenges due to which operations of some of the Indian companies have been hampered. Along with political instability in most of the African nations, investment in greenfield projects requires a huge investment. In addition, there is a feeling of insecurity in the Indian companies while investing in African countries. At present, some of the major investors in African countries are France, Italy, and Norway. As compared to these counties, Indians are going at snail pace when it comes to investing due to geopolitical situations. Meanwhile, what we feel is that the respective governments in those countries should provide a conducive environment and a supportive role, where the risk factor for any Indian investor would be mitigated.

Currently, how many Indian companies are operating in hydrocarbon space in Africa?
There are about nine companies, which are involved in various operations related to oil and gas activities such as drilling, setting up pipelines, storage capacities, etc. Apart from the presence of PSUs, private companies like Prakash Industries, Bajaj Group, Intertech Drilling, Hinduja Group, and Essar have already started their operation in African countries. These companies are involved in public-private partnership projects with the respective governments. Besides, the Government of India (GoI) has made sanctions to the African countries, under the Exim Bank line of credit. Under this, Indian private players are permitted to take up any government-based project in Africa, which is jointly developed by the Indian and the African governments. At present, the Indian government has sanctioned $5 billion to some of the African countries, which will gradually increase to $8 billion in years to come, against which these projects have been funded.

You also spoke about providing assistance for skill development to African nations. How are Indian companies helping this initiative?
When you think of serving the one billion African population, employment opportunity is a major challenge. Workforces in African countries are neither experienced nor educated. What Indian companies are initiating is to have a joint venture partnerships with African companies for skill and technology transfer from India.

In Africa, technology transfer has been a great issue of concern for researchers, companies, and policy makers. The transfer of knowledge is a key tool in technology transfer; technology cannot be transferred if there is no knowledge involved. Therefore, knowledge and technology transfer have to work together at the same rate of development to achieve socio-economic growth. One of the essential benefits that arise from technological transfer is the globalisation of industries; through it, the world comes together as one large market place. In recent years, India´s economic partnership with African countries has been lively, extending beyond trade and investment to technology transfers, knowledge sharing, and skill-development. Persistent efforts are being put in at the government level as well as the private sector level for a comprehensive engagement to march together as partners in progress.

In fact, GoI has also extended its hand through scholarships towards those from these regions seeking further education. Meanwhile, to make the entire training exercise more viable, we also send our technocrats to African nations, so that the workforce over there gets the best training and employment opportunities in the field of infrastructure, oil & gas, power, etc.

Meanwhile, is bidding for any energy-based project in the African region economically viable?
It´s not only economically viable but also profit-oriented. Economically viable in the sense that though African nations do not have liquidity, they have abundant natural resources. The African nations expect Indian companies to grow here and give chance to the private sector in Africa to grow along with them. The African nations want India to make use of the opportunities not just for their own benefit but for African private players´ benefit too.

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