US, China: Contending Interests in the Gulf of Guinea

By Roland Obasa

The tremendous change taking place in the global economy is shaping strategic interest in the Gulf of Guinea. Given the political climate in the Middle East which periodically has disruptive effects on oil prices and the accelerated growth of China and India, the region will occupy a more important place in the energy strategies of the United States, the EU and China. The United State’s interest in the region is informed mainly by the concern for energy security. The US Government’s energy policy has a strategic objective of ensuring that the country’s energy supplies represent a diverse set of sources. Indeed the US Government has made energy security a top priority with security and diversity of supply as the raison detre of its policy engagement on energy issues. Within this context, it recognises Africa’s role as a major energy supplier. Currently, 12 percent of US oil is imported from Africa. Nigeria has been the fifth largest supplier of crude oil to the US, with exports to the country averaging nearly 600,000 barrels daily. About 65 percent of Nigerian crude oil production is light and sweet, making it particularly suited for US refineries since it yields high volumes of gasoline. Angola, the second largest producer in the region also supplies a substantial volume of crude to the US. Gabon, sub-saharan Africa’s third largest producer currently produces about 300,000 barrels daily. Over 45 percent of Gabon’s oil output is exported to the United States. Equatorial Guinea is emerging as a major oil producer in the Gulf of Guinea. An average Equatorial Guinea produced 179,000 barrels daily including crude and natural gas liquids in 2002. By 2010, Equatorial Guinea is expected to produce 500,000 barrels daily of oil and NGL. It is also expected to become a supplier of LNG. Chevron, Amerada Hess, ExxonMobil, Marathon Oil and Deven Energy are some of the American firms with investments in exploration, production and service activities in the country. Sao Tome and Principe is also an emerging oil producer in the region. Sao Tome’s petroleum reserves spans both its own Exclusive Economic Zone, EEZ and a joint development zone with Nigeria, JDZ. The JDZ is estimated to hold substantial reserves, possibly as much 6 to 10 billion barrels. ExxonMobil has already made investments in Sao Tome. The US$3.7 billion Chad-Cameroon Pipeline which is led by ExxonMobil with participation of Chevron is one of the largest single private US investments in Africa. Ghana’s Jubilee field was scheduled to begin production late 2010. Exciting new finds have been made offshore Ghana. The United States certainly recognises the potential of the Gulf of Guinea to meet part of its excess demand for energy and has been taking steps to harness it. For instance, the United States Agency for International Development, USAID, provided assistance in the design and implementation of a regional regulatory framework aimed at controlling the exploration of natural gas as well as generation of electricity in Ghana and Nigeria. In the same vein, the US Export-Import Bank financed the West African Gas Pipeline, WAGP, which is 1,000 kilometres long and is meant to transport natural gas from Nigeria to Benin, Togo and Ghana. Equatorial Guinea has a gas plant that will allow the country to increase gas production each year by reducing flaring through re-injection and transformation of gas into LNG. This was estimated to cost the Equatorial Guinea government and the Texas headquarters of Marathon US$1.4 billion. With 16 percent of its total imports coming from the gulf of Guinea, the US will continue to consider the region as an area of strategic importance. This volume of oil imports from West Africa equals the volume of imports from Saudi Arabia. The National Intelligence Council predicts that “West Africa will play an increasing role in global energy markets, providing 25 percent of North American oil imports in 2015. Walter Kansteiner III, a former Assistant Secretary of State for African Affairs, addressing representatives of the US oil industry put it bluntly, “African oil is of national strategic interest to us, and it will increase and become more important as we go forward. It will be people like you who are going to develop that resource, bring that oil home and try to develop the African countries as you do it”. The re-evaluation which has taken place in US foreign policy and energy policy with the coming of President Barack Obama has not in anyway changed the basis thrust of those policies towards the Gulf of Guinea. In that context, Obama’s trip to Ghana was seen as informed by Washington’s strategy of working with regional allies in West Africa to develop relationships which will secure US energy security in the long-term. The US sees the Gulf of Guinea as offering the opportunity to break with the old policies which saw the US at the mercy of geo-strategic pressure of unstable or unfriendly oil producing states in the Middle East. America’s energy policy strategists believe the way forward is to promote a zone of energy security and prosperity in a part of the world that is relatively receptive to American presence. The US is however not alone in seeing Africa as a stable source of energy. There is a new scramble for Africa’s raw materials, especially energy resource. This has been caused by China’s astounding industrial growth and its growing influence in the global economy. It is now the second largest consumer of oil in he world behind the US. In 2006, nine percent of Africa’s oil exports went to China with 60 percent of Sudan’s oil China bound. Already China has sped past Britain and France to become Africa’s second largest trading partner behind the United States. China’s audacious attempt to wrest blocks from western multinationals in Nigeria is part of efforts to establish a foothold in the Gulf of Guinea. It is also part of its long-term strategy of securing natural resources for the China’s growing economy and building political influence in developing countries. Though Angola, the second largest oil producer in Sub-Saharan Africa supplies the United States with about twice as much oil as it supplies China, the Asian giant has outpaced the US in partnering Angola’s rapid development with its multi-billion dollar investment support for the country’s infrastructure. In 2006, Sinopec, China’s state-owned energy company bid US$2.2 billion for two deepwater blocks off the Angolan coast. Two years earlier, Beijing softened the ground with a US$1 billion package of loans and aid to Angola which has Chinese companies building telecommunications infrastructure, roads, railways, bridges, schools and hospitals. However analysts have pointed out that China’s NOCs were not grabbing the lion’s share of African oil as part of a grand quest for energy. But while China with a mere 3 percent of its foreign direct investment in Africa and controlling less than 2 percent of oil reserves on the continent, may not be winning the race for oil exploration and production in Africa, there is no doubt that China is winning more of the oil produced and supplied from Africa. Analysts say if the United States wants to outmuscle China in the 21st century scramble for Africa, it will have to show more aggression in investing in the development of infrastructure on the continent as China is doing. Ninety percent of US trade with Africa is in oil, gas and mining industries. “Much of the trade in these extractive industries have been exploitative, bringing little value to those on whose land the resources lie, assert critics. But supporters of American investment in Africa’s energy sector argue that American companies are bringing cutting edge technologies, enlightened management practices and resources to assist African countries in developing their energy sectors. Analysts close to the scene said American oil companies should show more interest and support infrastructural development in their host-countries. For now, many Africans believe they are increasingly feeling the positive might of Beijing in their quest for advancement. Chinese investment deserves a big part of the credit for Africa’s highest ever growth rate of 6-8 percent in 2007. Furthermore, China has cancelled US $10 billion in bilateral debt owed by African countries. Observers however warn that no matter the attractive package in which China dresses its economic engagement with the Gulf of Guinea, it is only interested in having access to African oil for fuelling its industries back home and may not be interested in the long-term real growth of the African oil and gas industry. Countries such as Nigeria are advised to fashion out a strategy which will help them reap maximum benefit from any increased involvement of China in their oil industry. American companies and their European counterparts should also be made to engage in ventures and business initiatives that real add real value to the local economy and help the long-term growth of the oil industry.

You can skip to the end and leave a response. Pinging is currently not allowed.

Leave a Reply

Designed by Cypress