Africa becoming major oil factor

IHS Energy, an oil and gas consulting firm, cal-culates that Africa will supply 30 percent of the world’s growth in hydrocarbon production by 2010. West Africa’s low-sulfur oil is highly desir-able for environmental reasons, is readily trans-ported to the eastern US seaboard, and can be easily processed by China’s refineries. Fifteen percent of US oil imports come from Africa; by 2010 this could reach 20 percent.

In this decade, US$50 billion will be invested in the Gulf of Guinea’s energy sector, accord-ing to a recent report by the Council on Foreign Relations. While US companies will account for 40 percent of this investment, other major play-ers – particularly state-owned energy companies – will play a critical role in determining the shape of Africa’s energy industry. From 1995 to 2005, national oil companies more than doubled the number of licenses they hold in Africa, from 95 to 216.

China’s energy firms are the largest state-owned investors, but India has also made signifi-cant investments and is looking to expand its presence in the region. However, political insta-bility, criminal syndicates and terrorism threaten growth in the region.

These factors are the main reason the region’s hydrocarbon industry has not fully developed in the past, but as China and India demand more oil and gas to fuel their rising economies and as major oil fields reach matu-rity in other regions, Africa’s oil and gas sup-plies have become more attractive invest-ments.

The rise of Africa’s energy industry is chang-ing the geopolitical landscape of the region. The West has found its leverage in the region chal-lenged by China’s willingness to invest in oil-pro-ducing states in order to ensure Beijing’s energy security.

For instance, a US$2 billion low-interest loan from China has all but scuttled the International Monetary Fund’s (IMF) attempts to tie economic assistance to reform in Angola.

In other areas, China and the West find their interests aligned, such as on the north-south peace accord in Sudan. In the coming years, Washington will be forced to adjust its policies towards Africa in order to compensate for China’s rising influence. China’s Influence in Africa China has been involved in Africa since before the 1960s, but, recently, the nature and level of its involvement has changed.

China is primarily invested in Africa in order to secure access to the region’s natural resources to fuel its expanding economy. Beijing is outbid-ding Western contractors on infrastructure proj-ects, providing soft loans, and using political means to increase its com-petitive advantage in acquiring natural resource assets in Africa. ‘ Daily Trust.

China’s deputy foreign minister famously told the New York Times: “Business is busi-ness. We try to separate politics from busi-ness.” This state-ment is not strictly true; China uses politics for different aims than does the West.

China uses its geopolitical position in order to gain access to natural resources around the world without regard to the domestic political situation where these resources are located, making China an attractive partner for many countries margin-alised by the Western powers for internal strife, corruption, and human rights violations. India, South Korea, Malaysia and Brazil are following China’s lead.

China, however, also has an asset that these other states cannot exploit – a permanent seat on the UN Security Council. Beijing’s willing-ness to use its seat to protect states from inter-national sanctions is welcomed in a region not lacking in egregious violations of international law and is undermining Washington’s influence in Africa.

This can be seen in Sudan, where Beijing has helped to prevent any meaningful Security Council resolution from emerging that would help to end the conflict in the Darfur region.

Beijing has not shied from investing in coun-tries that are being marginalised by the West in order to secure access to energy sources.

In other regions, China has repeatedly lost con-tracts to large, multinational corporations. Russia’s Siberian reserves were once thought to be all but wrapped up in a deal for China, but now Japan may win the contract.

The Chinese National Offshore Oil Corporation’s (CNOOC) attempt to gain control of Unocal collapsed under pressure from the US Congress. Such failures have pushed Beijing to take risks in unstable countries that it may not otherwise pursue, in part to avoid competition from the major multinationals.

The Financial Times reported on February 28 that Nigeria is shifting its sourcing for mili-tary equipment to China because US concerns about corruption within the Nigerian security forces have delayed the delivery of equipment.

In July 2005, China signed a US$800 million crude oil agreement with Nigeria, and Beijing is considering US$7 billion worth of invest-ments in Nigeria. Ethiopia called China “its most reliable [trading] partner” after Western states criticised its recent election irregulari-ties and its continuing border dispute with Eritrea. – Daily Trust.

June 2006
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