International Relations

Term Paper

The Politics of Energy Security:

THE CASE ON ONGC AND CHINESE COMPANIES IN AFRICA.

Submitted by: Submitted to:

Ayush Puri (2015IPM020) Prof. Venkat Raman
Kunal Singh (2015IPM054)
Prabhat Patil (2015IPM072)
 ABSTRACT :

Asian nations China and India have always looked upon African countries as a solution to
their problem of energy security. While China enter the race first, India too followed the
China’s path. Thus there emerged a race between both the nations to acquire a good
working relationship with African countries in order to secure its energy requirements. Thus
this paper discusses the competition between both the nations how exactly they are trying
to establish diplomatic relations with the African countries by providing financial aid by
investments and helping in building the infrastructures, and other things.
 INTRODUCTION OF THE TOPIC:

In the past two decades, energy security has become of the most important issue nations
are focusing upon. Major developing players in the market like India, China, US are focusing
on this topic because it is very important for a nation to be secure in terms of quantities of
energy for its people. Because of this reason, Nations like South Africa have become very
important because of the natural resources they have. So the power of natural resources is
now not constrained to Arab nations only. Because of the limited amount of resources, the
Politics for fighting for these resources have increased. Everyone is focusing on other’s
footsteps and is very keen in the deals different nations are making with resources rich
countries. Therefore, we will focus on the Politics of energy security and touch some
specific cases related to it.

Literature review
WHAT IS ENERGY SECURITY?

ENERGY SECURITY in the world can be best described in the form of a question: Do ‘we’
have sufficient access to supplies of energy which are needed to meet the demands of
various entities such as households, industry, military etc. Here ‘we’ refers to sovereign
nation-states which act on behalf of their citizens. In recent times, this concept of energy
security has guided the foreign and internal policies of many countries. Four major
attributes of energy security have been identified-

1. Availability- If a person has enough of what he needs at the time that he desires it.

2. Affordability- Is it economically viable for that person to acquire the energy supplying
resources.

3. Efficiency- Will we be able to use less amounts of the energy supplying resources and gain
larger amounts of output

4. Sustainability- This is probably the most important factor in modern times. Due to the
gradual degradation of our environment, we have to make sure that we are not harming our
environment further through energy production and use.

Availability and affordability have been the main focuses of energy security in the recent
decades. But due to the phenomenon of global warming and the general public becoming
more concerned about the environment, a shift in focus towards efficiency and
sustainability has been noticed.

It has been seen in the recent years that energy security is neither a fully market-driven
phenomenon, nor it is geopolitical. It is rather a combination of both. It has been suggested
by various economists that political debates about energy security focus on 2 main agenda
which are ‘market and institutions’ and ‘regions and empires’. Since the mid 1950’s energy
security policies of most governments in the world have focused on the role of markets and
institutions. An exception to this has been the energy security policy of The United States of
America. They have worked towards ensuring that they get uninterrupted access to energy,
no matter the adverse effects on the environment.
 The Politics related to Energy security:

Different aspirations shown from different countries lead to the geopolitics of energy. The
geopolitics of energy focuses on issues of energy such as who supplies it, securing reliable
access to the supply, level of emissions for a country etc. Geopolitics is going to be a driving
factor in global prosperity and security. Furthermore, it is widely believed that over the
coming decades, energy politics will determine the fate of our planet. In the recent years,
the political nature of supply and demand has gained the attention of the public eye. One
major reason for this is the unstable oil market. Oil in the modern world is one of the most
important resources. The transport system depends heavily on oil. So a disruption in the oil
market can bring the whole world to a standstill. Access to energy especially in the form of
oil is very important for developing nations as they do not just need oil to reduce poverty in
their nations, they also need these resources to grow their economies at a healthy rate.

Inability to obtain these resources by governments leads to the public becoming restless
and further failures may be viewed as a major failure on the government’s part. This leads
to the public losing faith in their leaders because of which even popular leaders get booted
from positions of power. These are the factors which have turned market power of energy
suppliers into political power. Shippers have come to vie for provisions, driving up costs,
provider riches and the ability to assume parts in local and global governmental issues that
go well past the GDP of nations, for example, Russia, Venezuela and Iran.

But changes in global climate have resulted in making geopolitics even more complex than it
already was. . The United Nations’ Intergovernmental Panel on Climate Change has
confirmed that the use of fossil fuels is the main reason for the increasing percentage of
greenhouse gases in the environment. Greenhouse gases lead to the increase in the global
temperature of the planet. After a few decades, these climate changes will create severe
flooding and droughts which will hinder food production in the world. This could lead to the
spread of various diseases and deaths across the globe, especially in the developing world.
The number of people affected due to environment related disasters has been estimated
around two billion and this number is expected to double in the next decade. The countries
in the meantime continue to compete for and use energy. It has become very important for
them now to do so in a sustainable manner. The politics of that debate, especially how to
pay for the expenses and dissemination of new advancements, and how to remunerate
those countries which contribute little to environmental change however will most
extremely experience its tragedies, are rising as the new focal point of convergence in the
geopolitics.
 The case of ONGC and Chinese companies in Africa

China investing in Africa

In the past two decades, energy security has become of the most important issue nations
are focusing upon. Major developing players in the market like India, China, US are focusing
on this topic because it is very important for a nation to be secure in terms of quantities of
energy for its people. Because of this reason, Nations like South Africa have become very
important because of the natural resources they have. So the power of natural resources is
now not constrained to Arab nations only. Until recently, Asian investment was to a great
extent limited to regions where Western organizations were preventing from getting to be
distinctly included they are one of the most important nations in terms of energy and
countries have started to invest in these nations. Now, because of the limited amount of
resources the Politics for fighting for these resources have increased. Everyone is focusing
on other’s footsteps and is very keen in the deals different nations are making with
resources rich countries. Therefore, we will focus on the Politics of energy security and
touch some specific cases related to it.
 What China wants from Africa?
Despite the efforts of public relations to depict the relationship as extensive and
multifaceted, China's main priority for Africa is accessing oil, minerals, and the raw materials
to boast its yearning industrialization endeavours. Such interest in Africa is a part of
extensive "going out" procedure that China started in 1990s, which encourages state and
privately owned businesses to invest in abroad, especially in natural resources rich
countries. China is anticipated to overwhelm the US in imports of oil on global scale most
likely by 2020 and will turn into the biggest worldwide consumer by 2035.

1. In order to ensure future supply, China is intensely investing in nations like Sudan,
Angola, and Nigeria. Africa additionally introduces an enormous market for Chinese
merchandise.
2. Investment in Africa can possibly encourage China's endeavors to rebuild its own
economy far from labor intensive industries, since labor costs in China have
increased. These factors feed the China's energy needs and absorbs Chinese exports
remains the main reason behind the China's engagement with Africa.

What Africa wants from China?

The Government of Africa expects political recognition and legitimacy from China and also
expects contribution from China through investment, aid, infrastructural development and
trade to further their economic development. Apart from this, Africa also expects China’s
interaction with them with some respect unlike the US and other Western countries that
interacts with them condescending tone which includes most preaching about the good
governance. Like for example, they expect China to invest in high risk projects or in some
remote regions which are not worth the investment as per Western government or
companies

Africa also wish to replicate fast growing economic development like China and firmly
believe that they can be benefitted from China in getting itself out of poverty.
 Discussion:
Chinese investment in Africa: What’s the real story?

In December 2015, President of China Xi Jinping offered $60 billion loan and aid package to
Africa. China claims that it aims to develop the infrastructure, improve the agricultural
condition and reduce poverty on the continent. China’s investment in Africa has increased
exponentially from $7 billion in 2008 to $26 billion in 2013. This had led to an a lot of debate
among international policymakers, observers and other experts.

Many of the African leaders simply believe that China’s intention towards Africa are quite
selfless and not exploitative like the western corporations .Supporters say that China’s plan
of building infrastructures such as railways, roads and telecom is something that Africa
really needs

However it has been found that some of the both political leaders and ordinary citizen
criticized China for failing, in reality, to fulfil its promises to contribute to Africa’s economy-
a dynamic which had led China to put its effort to generate economic benefit for Africa.

Opponents of China accuse China of having‘neo-colonialist’ behaviour since it acquires the

raw materials like oil, copper and zinc to boast its own economy. As per them China’s
approach towards Africa has exploitative motives which include the exploitations of oil,
minerals and other natural resources

Also, the western oil interests especially of America in African countries have been eroded
due to China’s acquirement of African oil. As per the analysts the continent of Africa has
become an important region from the geopolitical as well as strategic point of view since it
is one of the important players in determining the future oil production. The since China’s
influence erodes the oil interest of western countries in African region, china is potentially a
threat to westerner from the economic, foreign policy and security point of view.

Another negative point says that the westerner’s efforts to promote better governance and
try to improve the human rights in Africa are in vain, the environment there is damaged and
there has been the weakening of international regime due to the various activities and
influence of Chinese oil companies in Africa. As per some analyst China is responsible for
legitimization of human rights abuses and other corruption in unstable countries like Sudan
and Angola.

Also another negative point states that China through its diplomacy, foreign aid and good
government strategy has acquired governmental support in Africa which is unfair to
Western countries. For example: China has agreed to help in building of infrastructure,
railways and road in return of oil deals

Looking at the bright side, as per many policymaker and experts, there can be increase in
the world’s supply of oil, stabilization of the global oil market and better oil security because
of the activities of Chinese oil companies in politically unstable countries like Angola, which
will also led to the Africa’s development and will create various economic opportunities for
African countries.

ONGC VIDESH LTD AND AFRICA: RELATIONS

Introduction:
Africa–India relations have increased tremendously from the starting of 21st century. Africa
being an oil rich nation is a key player for energy securities of many countries. The main
reason why big nations such as china have been investing in Africa is because of its
capabilities of extracting oil from Africa. India, following the footsteps of china has also
started to invest in such nations. As we have seen how energy security is very important for
a nation to secure its resources for the future benefits, India have been looking forward to
extract oil and other resources from Africa. ONGC is the biggest player of oil in India. It has
seen the importance of resources in Africa and therefore has started to invest in markets of
Africa and other nations.

So we will try to now look broadly how ONGC has started to invest in Africa for oil. Being a
major constituent of energy, oil is very important for total resources of a nation. So how
ONGC is helping India for improving its energy securities is very important.

India- Africa trade relations:

In the coming decades, India needs to make an impact at global levels. To do this India
needs to have strong economy. Both trade and investment between India and Africa have
improved, reaching very high levels. Africa has 9% of world’s oil reserves and around 8 % of
the world’s natural gas. In less than decade, Africa has become a favoured nation in terms
on energy. Africa is important to India because:
 1. African oil reserves are located offshore which makes the process of exports easy.
2. Because of new technologies, African offshore resources have become easily
accessible.
3. For companies like ONGC Videsh ltd, Africa has opportunities for huge investments
in areas such as Sudan, Angola etc.

ONGC, A BIG MARKET INVESTOR IN AFRICA:

ONGC Videsh Limited (OVL) is the international arm of ONGC. It was made on 15 June 1989.

It currently has 14 projects across 16 countries ONGC holds 100% stake in ONGC Videsh

Limited. Presence of ONGC in Africa in not a new issue, but its recent developments is

something to look upon.

ONGC is planning to double its investments in Africa in the next 2-3 years. It has invested

about $8 billion so far. OVL director has shown the signs of doubling these investments.

India is interested in investing in both upstream and downstream projects. The major parts

where ONGC is willing to invest are Angola, Algeria and Equatorial Guinea. India’s

capabilities in the fields of technology and skills need the renewable resources of Africa.

Once these developments are on a rise, we will be able to secure our needs for energy.

On the other side, Africa would be benefited from India’s companies by setting up these

institutions in the less developed areas of Africa.i Other than huge amounts of oil, liberal

policies, conducive environment, foreign exchange are some benefits which counties like

India get from Africa.

African companies where ONGC is investing?

Tullow oil PLC is African – focused Exploration Company. ONGC is interested in buying
assets in the company so that we can aim to get 400,000 barrels per day of crude oil from
overseas. The assets include areas in Ghana and Kenya which will increase the oil
productivity of the nation.
Another area of investment is in a giant field of Mozambique and converting it into a liquid
fuel for LNG export. This project has the capacity to produce 20 million tonnes of LNG
annually and will World’s largest LNG export site.
One of the major recent developments held between ONGC Videsh ltd and republic of
Equatorial Guinea states that ONGC can explore the potential investment opportunities with
the upstream hydrocarbons sectors in Equatorial Guinea.
At present, ONGC Videsh has participation in 36 projects in 17 countries including
Azerbaijan, Bangladesh, Brazil, Colombia, Iraq, Kazakhstan, Libya, Mozambique, Myanmar,
Russia, South Sudan, Sudan, Syria, Venezuela and Vietnam.

Two sides of a coin, What Africa wants from ONGC and Indian Investments??

Though Africa is rich in renewable resources, it lacks in technological developments and in IT

sectors. We see that Africa needs to develop its areas which need investment from the
International markets. ONGC investments in Africa are designed to help the country’s
ambition of raising it global power status. Africa should take advantage of these investments
in other sectors as well such as agriculture, IT etc.

The major aim of the nation is to get investments. Reducing trade barriers, expansion of
duty-free market and access to various schemes can be very helpful for Africa to get
investments from giant markets such as India, China etc. The shift which we see from
investments from china to investments from India is because of the huge global potential
India has in various markets and how it can be very helpful for Africa.

Why ONGC is focused on investing in Africa?

Building relationship with Africa is important because of variety of reasons. But focusing on
few points, some of the main reasons of focusing so much on Africa are:
1. Assets are cheapest in Africa. The rates of LNG for Indian markets were around $8-
$12 mmbtu. While in areas such as Russia they are $14.
2. Secondly, India has a balanced energy trade with Africa. India has mainly imported
petroleum products from the refineries.
3. Africa is looking for investments around the nation and India being a developing
nation have a large potential in sectors like IT, Farma, agriculture etc.

ONGC TROUBLES IN AFRICA: ENERGY SECURITY AND POLITICS WITH CHINA

India has been growing rapidly in the past decades because of which its demand for energy
has been increasing at a fast pace. Energy security is something which is very important for
India in the upcoming years and ONGC Videsh ltd is helping India to achieve that target. But
India is facing difficulties from various sectors. We have mainly invested in areas where
there is a misuse of oil revenues, violation of human rights etc. China is also on the same
grounds with Africa. They are also developing the needs for energy security. This is causing a
rift and stiff competition between two nations to extract oil from parts of Africa.

Recently an outbreak of conflict in south Sudan has led to shut down on a deal with ONGC.
We are facing one of the biggest competitions from China leading to shut down of various
oil deals with South African oil companies. Political instability and internal conflicts are also
some reasons because of which ONGC is losing some of its biggest deals. ONGC Videsh ltd
in the past few years have developed significantly in terms of deals. Seeing this, interference
of China is becoming one of the biggest challenges of ONGC in Africa.

Chinese governments are changing its negotiations to protect its interest in Africa. Internal
conflicts and instabilities are some reasons because of which India is lacking behind China in
such conditions. China has a minister of African Affairs who is taking the negotiations in
Africa very seriously. To win these deals, India needs to learn from the past mistakes of
China. ONGC Videsh Ltd is making investments in right areas for development.

What ONGC needs to learn from mistakes of China?

China’s policies in Africa have often been criticised because of the fact that they came with
policies which were one sided, leading to developments only in China. Chinese used to
export labour to Africa for building of dams, rails etc on the construction sites. Because of
this, the local labours were not able to get opportunities for jobs. This was one of the many
cases in Angola because of which China is considered as ‘Neo-colonial’ power.

India has set up Development Partnership Administration with the Export Import Policy
which has led to development on both sides. The idea to get into this pact is to make this a
two-side affair which can also lead to developments of oil fields in Africa. The ties India is
making with the help of ONGC should not be exploitative rather it should be fair to both the
countries. The bilateral policies are therefore very important for the development of both
these countries.
 CONCLUSION:
From the above case and seeing the investments of ONGC Videsh ltd and China in Africa, we
have come to know how countries are eager to invest in the major nations rich in natural
resources. This discussion has again brought us to our starting point i.e. the Politics of
Energy security. Both ONGC and China have been fighting for the same resources for their
people. Actually, this is the situation in the whole world. Seeing the future of 2-3 decades,
Nations have been exploiting resources rich countries and are entering into Political fights
with each other.

With respect to China, in can be said that both the countries will be benefited with China’s
investments in Africa. It will lead to overall development of African areas in terms of
infrastructure, roads, railways etc and will help Africa to achieve a desired status in the
world. Same is with the case of ONGC. ONGC investments will help India to fulfil its
requirements of energy for such a growing population. On the other hand, Africa will also be
benefited from the bilateral treaties with India.

In the end, this has brought us to the same question we asked in the starting that Do ‘we’
have sufficient access to supplies of energy which are needed to meet the demands of
various entities such as households. Energy from oil, coal will remain one of the most
sources for energy for the next 2-4 decades and the more these resources are depleted, the
more Political instabilities between nations will occur. There will be interferences in the
deals between two nations which will add the concerns of Politics between nations.
Therefore Energy security is such an important topic to talk about in World’s context.
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