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Vying for West Africa’s Oil

Prepared by: Stephanie Hanson
May 7, 2007

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Africa contains only 10 percent of the world’s proven oil reserves, but in an increasingly uncertain market, oil companies are eyeing crude from West Africa’s Gulf of Guinea for reasons beyond sheer output. The region’s oil is light and sweet, making it easier and cheaper to refine than Middle Eastern oil. Moreover, most of it is located offshore, which means decreased transport costs and reduced risk of political violence. “Given the hundreds of thousands of barrels of Nigerian crude that are lost every year as a result of fighting, community protests, and organized crime, this is something the industry gets rather excited about,” writes journalist John Ghazvinian in his new book, Untapped: The Scramble for Africa’s Oil.

At the moment, energy executives are abuzz (NYT) about Angola, a newcomer to the Organization of Petroleum Exporting Countries (OPEC) and the second-largest oil producer in sub-Saharan Africa. The country has one of the world’s fastest-growing economies, thanks in no small part to China’s investment. In 2006, Sinopec, China’s state-owned energy company, bid $2.2 billion for two deep-water blocks off the Angolan coast.

But deep concerns linger about how Angolan officials will choose to invest their oil wealth. The country remains near the bottom of the UN’s human development index, as well as Transparency International’s Corruption Index. Furthermore, as James Traub reveals in the New York Times Magazine, the nature of China’s role in Angola remains opaque.

A new CFR report argues that Angola needs to diversify its economy to increase non-oil revenues. “With smart investments in airports and seaports, Angola could serve the region as a transport hub,” the report says. It also recommends that the United States strengthen its ties with the country to serve its strategic interests in energy and security in the Gulf of Guinea. But with China’s large investments and lax loan policies (PINR), it’s not clear how much incentive Angola has to forge a stronger relationship with the United States or diversify its economy.

The U.S.-China competition in Africa extends beyond securing access to oil. China blocked U.S.-backed efforts at the UN to heavily sanction the Sudanese government for its alleged role supporting attacks on civilians in Darfur, in which an estimated two hundred thousand people have been killed. And China’s massive no-strings-attached loans undermine U.S. attempts to improve transparency and good governance in Africa, writes Ian Taylor in Foreign Policy in Focus. “It’s on human rights and governance, not oil or strict security matters, that the interests of the United States and China will likely collide,” argues Paul McLeary in Foreign Policy. But the official charged with leading the World Bank’s infrastructure lending, Katherine Sierra, tells CFR.org that the bank sees China as “potentially a good partner in developing countries.” She says, the bank has invited China to take part in a consortium that seeks to make infrastructure investment in Africa effective.

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