Africa plays stronger hand

Turning the taps: Explorers have opened up new swathes of the contitent from Lake Albert in the east to the offshore frontier in the Gulf of Guinea

FT special report on African oil & gas.  The main point stated is the stronger hand that African is using  towards the rest of the world, especially investment from Asia and the west. Link here to rest of report(PDF).

African countries with oil and gas reserves have grown accustomed to hearing how exciting they are. Less explored and than the Middle East, possessed of sweeter crude than Latin America and in no position to imitate Russia’s strong arm tactics, they are, energy experts keep telling them, the future.

Explorers have opened up new swathes of the continent, from Lake Albert in the east to the 1,100km offshore frontier discovered in the Gulf of Guinea. Ghana and Niger are due to pump their first barrels in the coming months.

Billions of dollars have poured into deepwater and natural gas developments in Nigeria and Angola, the industry’s linchpins.

“In the past 10 years, African oil producers have become the beautiful brides,” says Charles Ukeje, an international relations specialist at Nigeria’s Obafemi Awolowo University. “We are witnessing a new scramble.”

But crude is trading at roughly three times the average of the previous two decades and African governments have begun to respond to the surge of interest by asking with increasing vehemence: “What’s in it for us?”

Their hand is certainly strengthening. US dependence on African crude is projected to hit 25 per cent by 2015. Late last year, Nigeria surpassed Saudi Arabia as the third biggest supplier of crude to the US.

In April, China imported more oil from  Angola than anywhere else. Europe is hoping a gas pipeline across the Sahara will reduce its dependence on Russian oil – and was rattled when Gazprom tried to muscle in on the project.

But the days when international institutions exhorted African countries to offer incentives to lure investment at all costs are gone.

“African states are entitled to receive a fair deal for the exploitation of their natural resources,” said the authors of a survey of the continent’s economies last month by the African Development Bank (AfDB) and the Organisation for Economic Co-operation and Development.

Oil investors’ ability to strike workable bargains in Africa will go some way to deciding whether what are believed to be the world’s biggest untapped hydrocarbon stocks will remain in the ground or whether the region will shoulder a greater share of global production.

Nigeria, home to 60 per cent of sub-Saharan Africa’s proven oil reserves and 70 per cent of its gas, although hampered by graft and mismanagement, has been the most abrasive battleground for this renewed reckoning.

Why is this time different?  In the past, the Western interest was always defined by boom-and-bust mechanics, whereas the Asian demand this time around will be substantial and sustained.  America’s long efforts to encourage marketization and integration in Asia have helped create this historic opportunity. That’s why Africom’s primary focus, in my opinion, should be in enabling this “scramble” by improving local capacity for security provision.

There is no question that social tensions will be created, and that governments in Africa will respond sub-optimally, but this is a huge opportunity not to be screwed up, and a perfect locale for strategic partnership to emerge between Africa and developed world. The same way that has happened to Asia and US-Europe.

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