Thriving political relations between Egypt and India are best reflected in growing investments in the oil industry.
Egypt’s relations with India date back to the beginning of the twentieth Century. Egyptian historic figures like Saad Zaghloul, the leader of the 1919 Revolution and head of the liberal Al-Wafd party, were on good terms with India’s iconic leader Mohandas Gandhi, both of them shared the common goals of their respective movements aiming at independence from the British occupation. These solid relations, as a matter of fact, strengthened following the outbreak of the 1952 Revolution in Egypt, as close ties between Gamal Abdel-Nasser and Nehru resulted in the birth of the Non-Aligned Movement in 1955.
Economic relations between the two developing countries went hand in hand with the political ties. According to latest governmental figures, Indian investments in Egypt are valued at $320 million. Trade between the two countries hit $1.5 billion in 2006, according to the Indian Embassy in Cairo.
Given the Indian government’s ambitious plans to become an Asian industrial giant, like China, Indian energy companies have eyes for oil countries in Africa. Therefore, investments in the Egyptian oil industry have been high on the Indian businessmen agenda. With the growing Indian demand on oil, contracts were signed between the Egyptian General Petroleum Authority in 2001, 2002 and 2003 to export shipments of oil to India’s giant Reliance Petroleum Limited. Also, in 2004 the Gas Authority of India Limited (GAIL) bought 15% of Egypt Nat Gas distribution and marketing company.
India’s interest in investing heavily in the Egyptian oil industry was further galvanized in 2004 when the then Minister of Petroleum and Natural Gas Mani Shankar Aiyar discussed with his Egyptian counterpart Sameh Fahmi giving a boost to Indian investments in Egypt’s oil industry.
Earlier this year, however, the relations between the two countries gained more momentum when Preisdent Hosni Mubarak met the Indian Petroleum and Natural Gas Minister Murli Deora in April. The meeting was aimed at giving a push to Indian investments in the field of exploration and drilling as well as setting up joint enterprises exclusively for oil derivatives and petrochemicals. “India is keen on cooperating with the petroleum and natural gas producing countries including Egypt since we need enormous quantities of petroleum, natural gas and energy in light of our ambitious programme of industrial development,” Deora said following the meeting.
Deora then told Mubarak that the Indian energy company ONGC Videsh Ltd. and its partner IPR Red Sea Inc. made a significant oilfield discovery in their first exploration well in the North Ramadan Concession in the Gulf of Suez.
Later in May, the Egyptian government announced that the Indian company ESSAR expressed keen interest in setting up an oil refinery in northern Egypt that will cost around $3.4 billion. Expected to start operation in 2010, the refinery will have a daily production of as much as 300 thousand barrels per day. Other Indian oil companies are studying a mega project to set up an oil pipeline extending from the Mediterranean Sea to the Red Sea coast to help increase the amount of exported oil to Asia, and especially India.
Nevertheless, the announcement this month about the biggest Indian investment in the Egyptian oil industry came as music to the ears of Egyptian officials. According to the Egyptian cabinet’s spokesman Magdi Radi, the Indian industrial group Reliance will invest $10 billion in the oil refining and petrochemicals and plastics industries in Egypt. Having met Reliance executives in the coastal city of Alexandria, Prime Minister Ahmed Nazif announced that the investments by Reliance would include $1 billion to build an oil refinery and $7 billion in petrochemicals.
The company’s decision, of course, came in light of the good political relations between the two countries. In addition to being a politically stable country, Egypt, in fact, is becoming a big source of gas. Also, the strategically vital location, which Egypt enjoys—halfway between the African, European and Asian continents—has galvanized the Indian company to invest heavily in Egypt.
Nevertheless, while all the governmental circles welcomed Reliance’s unprecedented investments, oil experts are still raising questions about the deal. Magdi Sobhi, oil expert at Al-Ahram Centre for Political and Strategic Studies viewed the petrochemicals factory to be set up by Reliance as the most important part of Reliance’s investments. “What is new about the incoming Indian investments is that they will not be spent solely on excavation; rather they will be used in manufacturing oil products in a petrochemical factory,” he said.
The $10 billion figure raised many eyebrows, since it’s one of the largest in the history of Egyptian oil industry. Sobhi cast doubts on the $10 billion figure, notwithstanding. “The figure is a bit misleading and unclear, for officials didn’t mention a timetable for the projects to be set up according to this deal,” he pointed out. “These investments could be spent on the oil industry over a long period of time,” he added.
By Mohamed El-Sayed