India, China and crude politics

THE NEW KINGS OF CRUDE
China, India, and the Global Struggle for Oil in Sudan and South Sudan
Luke Patey
HarperCollins
357 pages; Rs 499

At the 1955 Afro-Asian Relations Conference in Bandung, Indonesia, Jawaharlal Nehru wrote "Sudan" on his handkerchief to fashion a makeshift flag to celebrate the African nation's imminent independence. Nehru and Indira Gandhi had visited Port Sudan in 1938, while Mohandas Gandhi had dropped by three years before in 1935. India's first chief election commissioner, Sukumar Sen, oversaw Sudan's first multi-party elections in 1953, and India opened a liaison office in Khartoum two years later.

A half-century later, in 2003, then deputy prime minister L K Advani stood at the Mangalore harbour as the oil tanker Sea Falcon delivered 600,000 barrels of Nile blend crude from ONGC Videsh Ltd (OVL)'s oil block in Sudan. "This is not imported oil," Mr Advani reportedly said. "This is India's oil."

In The New Kings of Crude: China, India, and the Global Struggle for Oil in Sudan and South Sudan, Luke Patey details the corporate battles and diplomatic manoeuvring that made OVL and the China National Petroleum Corporation (CNPC) principal players in one of the world's most politically unstable oilfields and offers a nuanced perspective on India and China's global hunt for energy.

In 2013, India imported 3.86 million barrels per day of crude oil, overtaking Japan as the world's third largest importer. We import a little over 70 per cent of our crude oil requirements that cost us nearly $160 billion last year.

While Indian investment in Africa pales in comparison with China's ever-expanding engagement, the continent accounted for 16 per cent of India's oil imports last year. India is now the biggest buyer of Nigerian oil, and OVL has acquired exploration blocks in Nigeria, Libya, and a stake in Mozambique's recently discovered natural gas deposits.

In the coming decades, 700 million energy-deficient Indians are likely to transition from traditional fuels, such wood and biomass, to natural gas and electricity. Oil production in OVL's asset in South Sudan, however, ground to a halt in December last year against the backdrop of a brutal and protracted civil war. Mr Patey's account of OVL's Sudan experience is particularly useful in this context.

Mr Patey, a researcher at the Danish Institute of International Studies, focuses on the development of the petroleum sector in Sudan, China and India, using anecdotes, interviews and first-person accounts to sketch deft portraits of the principal personalities and institutions that shaped this unlikely alliance.

The first section focuses on the relation between petrodollars, United States policy and Sudan's measured descent into chaos; the second describes the political ascent of China's powerful oilmen from the oilfields of Daqing to the rarefied realm of the ruling party's Politburo. The India section profiles Atul Chandra, who served as the managing director of OVL at the time of the Sudan investment.

Mr Patey offers a balanced account of how CNPC and OVL eventually came to plumb the fields first developed in the 1970s by Chevron, the United States oil giant. While CNPC and OVL were mostly unaffected the by the global outrage over Sudanese President Omar al Bashir's genocide in Darfur, and the current civil war in South Sudan - which has claimed over 10,000 lives and displaced 1.5 million people since January - the Chinese and Indians helped Sudan build its own oil sector and refine its own crude, unlike Chevron that hoped to simply siphon off crude to its refineries abroad.

The oil revenues, Mr Patey notes, in all likelihood prolonged the conflict by propping up the tottering regime in Khartoum. Yet OVL and CNPC were no different from a host of other oil companies working with similarly repressive regimes.

In 2011, however, both countries had to re-calibrate their relationship with Al Bashir's regime when South Sudan declared independence after decades of civil war. The division left landlocked South Sudan with most of the region's oil reserves, while Sudan retained the pipelines, most of the refineries, and Port Sudan, where oil is loaded on to tankers and shipped across the world.

While OVL has a stake in the Unity fields in the south, it has also financed a 741-kilometre pipeline in the north from the Khartoum refinery to Port Sudan.

Mr Patey also defuses alarm that Chinese companies are locking up oil resources across the world, by pointing out that the oil extracted in Sudan is sold on international markets rather than shipped back home to India or China. This, he notes, has led some to wonder how OVL's investment's abroad actually contribute to India's energy security.

"It is difficult to assess how OVL's oil production in Sudan and other overseas ventures could measurably improve India's energy security," he writes, explaining that any oil brought back to India would be governed by international market prices. "At best, the profits generated from Sudan … helped the Indian government to use the parent company as a funding source for the subsidy programme to provide cheap fuel."

The New Kings of Crude is a clear-eyed account of the machinations of the newest players in the global oil business. The growth of India, China and the African continent is mirrored by the rise of a new and interesting rhetoric where deals, once delivered on the promise of "western technology" and know-how, are now forged on the anvil of "South-South" cooperation.