Full Marks On Project Sudan, But we mustn’t put all our eggs in one basket
Edits & Columns
Jan 23, 2004 — ONGC Videsh Ltd (OVL), the overseas arm of ONGC, has done a commendable job by acquiring stakes in Sudan, a country that was considered a security risk by many. Now, not only is it increasing its portfolio in that country, its success there has also attracted the interest of other Indian companies like Reliance and GAIL. Even the US government is now displaying interest in Sudan – a country that it once tagged as a “terrorist state”, and was, in fact, instrumental in pressuring the Canadian oil company, Talisman, to sell its stake in Sudan. Under these circumstances, OVL’s decision to take the plunge in a country that has seen infighting since 1983 is creditable. In fact, given that India has been a late starter in the equity oil game, and its state oil companies have been strapped for the sums needed to compete with cash-rich foreign energy companies, OVL’s strategy to buy stakes in countries that are largely ignored by western oil companies has paid substantial dividends.
That said, OVL and other Indian oil firms should not restrict themselves by putting all their eggs in one – or two – baskets but should cast their investment net further, including in countries that are considered off limits by western countries. Indian companies have the reputation of being diffident when it comes to negotiating overseas investments, and have often lost out to more aggressive and well-heeled players. For instance, China National Petroleum Corp, whose equity oil portfolio reached 21 million tonnes in 2002, has successfully negotiated deals in Africa, Central Asia, Latin America and South-east Asia, even beating some western oil majors, and is now aiming to double its revenue by 2010. Given that India’s oil demand is expected to go up from the current 6 per cent to 8-10 per cent per annum, and its indigenous production will not be able to satisfy this burgeoning demand, its energy security policy behoves that a substantial portion of its demand is met through greater indigenous production as well as equity oil. While recent finds in Rajasthan and the eastern coast by foreign and domestic companies are encouraging and some equity deals have been negotiated in Myanmar, Russia, Vietnam etc, they will not be sufficient to meet the country’s growing energy needs. Indian exploration and production companies have to shed their fixed deposit rate of return mindset and display the boldness required to take the country’s equity stake to at least 20-30 per cent of its oil requirement – even if it means going into countries that may be considered politically risky.