Ijeoma Agudosi-Lagos
India government has signified interest to invest in Nigeria’s oil and gas sector as African oil exports faces pressure from Gulf States.
There are fears that Asia has become a market for a price war between African and Gulf oil producers, who compete for the global oil supply market, Africa needs to diversify and secure its global market position as a global oil exporter. Hope might come from India.
Many African sellers like Nigeria and Angola now faced with precarious finances due to plummeting oil prices, are struggling to make inroads into Asia, which is a Middle Eastern stronghold.
Low operating costs in Saudi Arabia, Kuwait and the Emirates allow these countries to offer bigger discounts while African exporters face higher transport costs and are more exposed to fluctuations in freight rates between Africa and Asia given the relative advantage of Middle Eastern shipping distances to Asia.
West African producers traditionally sold most of their oil to North America and Europe, but exports dwindled given the increase in domestic oil production in the United States and higher output from nations outside the Organization of the Petroleum Exporting Countries (OPEC).
This has been a big setback for West African oil producers but the news about India’s state-run companies looking to acquire stakes in oil and gas blocks in Africa comes as a relief to African exporters.
The country has announced to form joint ventures in Africa to meet increasing fuel demand in India and at the same time become a reliable supplier of petroleum merchandise to Africa.
India has been facing a substantial energy deficit and imports about 80 per cent of its crude oil needs.
India’s oil minister S. Jaipal Reddy said, as quoted by Oil Review Africa (ORA) “Today as a lot as 21.5 per cent of India’s crude oil imports are from Africa. In the years ahead, we seek a lot more crude oil and liquefied organic gas from Africa.”
His country has been facing a substantial energy deficit and imports about 80 per cent of its crude oil needs and is in scouting for hydrocarbon assets that can boost its energy safety in the long term, the minister added.
“Our firms are also interested in farm-in possibilities in creating blocks, especially in Libya, Algeria, Egypt and Nigeria,” Reddy said according to ORA, adding that firms like GAIL (India) Ltd, Petronet LNG and Indian Oil Corporation (IOC) are interested in sourcing all-natural gas on a long-term basis from Africa.
The minister is quoted as saying that there is no ceiling on imports from the African continent and that India is attempting to maximize its oil sources in Africa.
However, he didn’t specify which projects Indian oil providers had been eyeing, how much they would invest.
With Africa’s economic development picking up momentum and a drop in global oil prices by 46 percent in 2014, India is a welcome option for African oil producers.