Africa´s Chinese checker
By Upstream staff
Africa, oil´s Cindarella, has finally been invited to the ball—and she now has many suitors.
A decade ago the continent´s states recognised a window of opportunity to attract new partners and shore up revenues.
From Senegal to Sierra Leone, Tanzania to Mali and Namibia, governments began to redraw their petroleum codes while a profusion of new minnows pushed to acquire smaller assets deemed marginal by major players in more mature provinces like Nigeria and Angola.
Fiscally attractive production sharing contracts began to replace the old concession regimes as nations competed to attract investorsand companies jostled to stay ahead of the curve, picking up vacant acreage in conflict-ridden provinces such as the Niger Delta, southern Sudan and the war-torn Cabinda enclave.
Previously ignored gas-prone provinces enjoyed fresh attention. LNG markets boomed while gas-to-power projects gained renewed favour with multilateral lenders. States began, with varied success, to clarify special incentives including regulations governing gas ownership and the monetisation of gas assets. Africa´s petrocrats offered suitable assurances regarding contract enforceability and respect for human rights.
Yet all of this activity was predicated on two key assumptions. Firstly, that burgeoning economic growth in Asia and tightened supplies to the West, especially the US, would sustain the strategic importance of Africa as an oil supplier.
This has held true. The CIA predicts that some 25% of US oil imports will come from Africa before 2015 and efforts are under way to strengthen military support bases from Djibouti to Sao Tome in the Gulf of Guinea.
Secondly, it was assumed that international initiatives to assist African states resolve perennial communal and ethnic conflicts would bear fruit. So far this looks unlikely. Tensions have heightened in Nigeria´s Niger Delta while efforts to pacify hotspots in the Democratic Republic of Congo, Somalia and southern Sudan appear still-born.
Moreover, the ability of the West to influence events looks set to be further undermined by Asian players—South Korea, India but especially cash-rich China—to boost reserves and lock in supplies for the long term.
The aggressive tactics employed by Beijing´s oil giants to secure upstream positions in exchange for investment in downstream and other strategic sectors have convinced African leaders they can disengage with the West on corrupt practices and human rights issues.
Chevron and Petronas this year had to climb down ina dispute with N´Djamena over the alleged non-payment of taxes, leaving the more powerful ExxonMobil to stand firm over original contract terms governing its Doba Basin development.
President Idriss Deby´s brazen expression of hope that Chinese companies would one day become the biggest producers in Chad left no one doubting his source of inspiration.
Former US Assistant Secretary of State for Africa Walter Kansteiner this month spoke fearfully of a“tsunami”of Chinese trade sweeping Africa, just days before a ground-breaking China-Africa Summit was convened with 48 heads of state in Beijing, resulting in 16 bilateral deals worth $2 billion.
China´s trade with Africa this year is pegged at $50 billion and will double by 2010. Beijing´s 7% share of the African market has overtaken the US while Chinese companies have invested $4 billion in Sudan alone.
China receives 522,000 barrels per day from Angola, now its largest trading partner on the continent, and aims in future to boost oil imports from E&P assets acquired in Angola, Kenya, Chad, Niger and Nigeria.
The Nigerian government is ratifying four blocks for China National Petroleum Corporation in exchange for a $2 billion refinery in Kaduna. The China National Offshore Oil Corporation, having already bought into Total´s Akpo field development last year, is seeking rights of refusal on four more blocks in the 2006 bidding round scheduled to kick off in mid-November.
Asian players have boosted signature bonuses expected during licensing exercises. Nigerian director of the Department for Petroleum Resources Tony Chukwueke notes that while nine blocks netted $9 million in 1990, this figure ran to $1.2 billion for 20 blocks in 2005 while 2006 looks set to be a bumper year.
Few believe China´s presence will help improve human rights in Chad or Sudan, where CNPC enjoys a strong partnership with the state oil company and the Greater Nile Petroleum Company.
Individuals close to Beijing´s politburo have also teamed up with companies linked to Sudan´s rebels, raising the spectre of a new tier of Chinese indies joining the African safari. Some 4000 soldiers from Peoples Liberation Army help guard an oil pipeline in Sudan that supplies 7% of Beijing´s total oil imports
Beijing has yet to sign up to the Extractive Industries Transparency Initiative or the so-called Equator principles encouraging“greener”financial practices while both the World Bank and IMF are worried that easy access to cash and a rapid build-up of debt may scupper modest gains in good governance.
“China separates business from politics,”said Chinese deputy foreign minister Zhou Wenzhong, a feature not inconsistent with an upsurge in sales of military equipment to Africa. So, for the continent´s despots and their successors, it is business as usual.
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17 November 2006 00:01 GMT | last updated: 17 November 2006 00:01 GMT
