India has joined the race for new oil supplies, offering up to $1 billion in development grants to build power projects, railways, refineries and sports stadiums in oil-rich but poor African nations.

India imports 70 per cent of its crude oil, and although it has encouraged widespread exploration projects within its own territories - where companies such as Cairn Energy have prospered - it is now seeking to secure long-term supplies elsewhere.

"India has decided to offer lines of credit up to $1 billion on a government-to-government basis to these countries for infrastructure projects in exchange of oil exploration rights," Talmiz Ahmad, a senior India oil ministry official, told Reuters. "West Africa is a long-term investment destination for India."

Mr Ahmad said India will offer commercial partnerships and joint ventures to a group of African countries in oil, roads, railways, IT, power and ports under the partnership development initiative.

"This model is definitely worth pursuing," he said, noting the Africans now seem to realise the spoils of their oil should go into infrastructure instead of the pockets of oil majors.

A $6 billion infrastructure investment deal struck in Nigeria this month by ONGC Mittal Energy, a joint venture between India's state-run Oil and Natural Gas Corporation and the world's largest steel maker, Mittal Steel, is seen as a major breakthrough in this strategy.

Nigeria is the only West African member of Opec, and has long been an exploration venue for the likes of BP and Shell. But it desperately needs yet more foreign investment. "The ONGC deal is just the beginning of India's entry into West African oil exploration," Mr Ahmad said.

India will now look to a group of eight West African countries in a special cooperation model called the Team-9 initiative, under which India offers credit for projects set up by Indian companies through the Export Import Bank of India. Team-9 countries include Burkina Faso, Chad, Ivory Coast, Equatorial Guinea, Ghana, Guinea-Bissau, Mali and Senegal.

Mr Ahmad said Sao Tome, Niger, Democratic Republic of Congo and Congo Brazaville would also be approached by India.

ONGC's presence in Sudan's Greater Nile project enabled it to build a $259 million pipeline from the port to the oil production facility and then transfer it to the Sudanese government.

"These kinds of assistance are no doubt helpful," said Praveen Martis, an analyst with Wood Mackenzie. "The Chinese have been doing it in countries like Sudan and Kazakhstan, where they have a substantial oil equity investment in the region, for quite a while now.

"There is a risk factor in this, but it could be worth it if it helps Indian oil companies in strengthening relationships with the host countries and, in turn, offering a better chance in securing assets in these countries."

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