ERHC Mentioned on Upstream - Sept. 16, 2005
by Barry Morgan
Nigeria looks to secure its future as major supplier to US
THE US may plan to take more than 25% of its hydrocarbon needs from western and central Africa by 2015, practically doubling present imports from the region, but Washington will not be alone in seeking to unlock the area's untapped riches. Players from the east are already competing for proven assets and prospective acreage.
Nigeria too is playing its own game. Strict local content rules applied to the latest licensing round coupled with preferential treatment for companies willing to invest downstream in return for prized deep-water plots left the majors deeply miffed and they stayed away in droves.
Korean National Oil Company and Taiwan's Chinese Petroleum Corporation swept into prime position, roundly outbidding medium-sized US rivals such as Devon Energy. India's ONGC-Videsh won junior equity but Beijing's three oil giants did not even get a look-in.
Clearly there will be considerable pressure brought to bear on Abuja to relax its regime ahead of the next round, planned before 2007. There are also technical questions to answer recent probes in the western Niger Delta deep disappointed the pundits, prompting established players to show caution in committing dollars to unproven plays.
Nonetheless, old Africa hands along with relative newcomers to the Gulf of Guinea such as Noble Energy and Pioneer Natural Resources will be jockeying for position in the Joint Development Zone, reputed to contain upwards of 10 billion barrels, managed by Nigeria and Sao Tome under a bilateral protocol.
Both entered the fray in partnership with ERHC Energy, the US minnow with strong links to Abuja's power-brokers.
Success with Chevron's upcoming wildcat in the JDZ Block-1 will boost confidence in the zone and focus Washington's hawks on how to shore up its interests in the area.
The US is already backing construction of a deep-water port at Neves on Sao Tome and negotiating a military support facility on the archipelago.
With substantial upstream investment onshore Nigeria by Chevron, ExxonMobil and Shell, Abuja aims to raise oil output from 2.5 million barrels per day to 4 million bpd by 2010, with liquefied natural gas exports earning more than crude by 2012.
Nigeria is already the fifth biggest crude supplier to the US, yet offers poor security.
An upsurge in piracy in south-eastern Nigeria coupled with mounting ethnic unrest has led one US Nato general to warn the federation may fall apart under the strain.
Incensed by Abuja's refusal to allocate lucrative oil licences to southern indigenes, ethnic Ijaw leaders this month promised to sabotage exploration and production efforts by the Koreans and Taiwanese, especially plans to lay gas pipelines to the northern states.
There are fears the country could implode, bringing down the entire sub-region.“It's a 3000-mile (4800-kilometre)coastline with no security,”agrees Lieutenant Commander Daniel Trott of US Naval Forces Europe.
More to the point, Osama bin Laden has officially marked the country down for“liberation”effectively declaring the African interior a war zone.
Already, US forces are stretched throughout the Sahel from Nouakchott to Ndjamena, mopping up terror cells and training partner-states to do the same. Fed by Algerian intelligence, US policymakers fear Mauritania's Salafist-style terror cells may spread to the oil patch.
Nigerian President Olusegun Obasanjo this month approved an anti-terror Bill covering everything from kidnapping to the destruction of infrastructure, even specifying fixed platforms on the continental shelf.
At the same time, Defence Chief of Staff General Alex Ogomudia announced a combined police-military operation to step up protection of oil installations in the delta.
In a parallel pitch, Nigerian oil moguls will this month hear overtures from New York-based Infinity World Telecom to support a $500 million scheme to link all offshore fields to the global telecom system.
Direct links to onshore facilities are also mooted, bypassing reliance on the national utility and underscoring Abuja's concern to keep oil flowing at all costs.
It is a preventive strategy to keep terror off the seas by developing partnerships and capacities, says Trott. To this end, the US is convening a second gathering of regional naval chiefs in Ghana this December.
While making headway in Sao Tome through US corporate ambition in the JDZ, US military and officials have encountered resistance in Equatorial Guinea, where Beijing's influence is rising.
Both states are coup-prone with Malabo unable to provide effective security for offshore installations, leaving companies to deploy private guards.
US company Military Professional Resources has been contracted to train local forces to plug the gap, but ostensibly without any quid pro quo on Malabo's deteriorating human rights front.
Of all the potential hotspots, post-war Angola has pleasantly surprised pessimists. Yet issues of financial probity persist, both in Luanda where output growth has been slower, and also in Malabo where oil revenue boosted Equatoral Guinea's GDP by 60% in the past two years.
The US Securities&Exchange Commission has dragged ExxonMobil, Marathon, Amerada Hess and Devon Energy into protracted enquiries to determine a breach of the Foreign Corrupt Practices Act.
Only Nigeria looks set to implement the UK-inspired Extractive Industries Transparency Initiative, but progress is slow and the region will likely continue to be source of embarrassment for western E&P operators.
Recoverable offshore reserves across the West African arc from Ivory Coast to southern Africa are estimated to be in the region of 30 billion barrels and the influential Washington and Jerusalem-based Institute for Advanced Strategic and Political Studies believes this prospectivity must drive US foreign policy.
--------------------------------------------------------------------------------
15 September 2005 23:02 GMT | last updated: 15 September 2005 23:02 GMT
- - - - -
AI
