- The Washington Times - Sunday, September 28, 2003

U.S. oil companies have been drilling off the west coast of Africa for years, but as major players like ChevronTexaco and ExxonMobil continue to strike massive oil deposits in these deep waters, the Bush administration has taken notice.

The United States has been scouring the planet for new sources of oil beyond the Middle East. The September 11 terrorist attacks and the war in Iraq convinced the administration that the United States must move quickly to find new foreign oil partners.

What better place to look than an oil-rich region that lies just 4,500 miles from the East Coast, with an unobstructed sea route to U.S. ports, a region that could supply as much as a quarter of U.S. oil imports?

West Africa is rapidly emerging as a key strategic outpost for President Bush’s twin policy goals of taking the war on terror far away from U.S. borders and breaking the Arab stranglehold on world oil prices.

Oil industry analysts caution that while boosting world production could ease prices, there is no untapped region in the world that has nearly as many reserves below ground as the Middle East.

But as the price of oil and geopolitics become more entangled amid turmoil in the Middle East, the Bush administration — from the State Department to the Pentagon — is finding more reasons to become actively engaged in West Africa.

“The U.S. is always looking for alternative sources of oil. We need to find sources that we can depend on, and certainly the Gulf of Guinea is one of those areas,” a top State Department official said.

“But oil is not the driving force in this region. Clearly, shoring up security in these regions helps us in our global war on terrorism, which is a major linchpin of our current foreign policy.”

The State Department is actively trying to further “democratize” the nations around the Gulf of Guinea, many struggling under rampant poverty and political unrest, despite controlling tens of billions of barrels of oil.

Meanwhile, the Pentagon and NATO have begun a strategic reassessment of the region in light of the United States’ growing interest in steady supplies of oil, and signs that the current unrest in the region — which has a heavy Muslim population — is a ripe target for organizing efforts of the al Qaeda terrorist network.

Currently, the United States gets about 14 percent of its oil from Africa, with major producers like Nigeria and Angola leading the way. It is estimated that by 2020 the United States could receive a quarter of its oil from this region. By contrast, 30 percent of America’s oil imports come from Canada and Mexico, and 26 percent comes from the Persian Gulf.

Several other West African countries — like Chad, Congo-Brazzaville, Equatorial Guinea and Sao Tome and Principe — are emerging as new and potentially strong oil producers. West African oil production, currently at 3.5 million barrels per day, could top 6 million barrels per day in the next decade, according to Michael Rodgers, senior director for PFC Energy in Washington.

“There is no doubt that over the next decade there will be growing production in West Africa,” Mr. Rodgers said. “Anytime you have more oil coming onto the market it has the net effect of helping to keep prices down.”

Expanding pool

Business is booming around West Africa for major oil companies, which are exploiting recent advances in deepwater drilling technology to tap new fields under the ocean floor.

ExxonMobil announced July 31 that it made its 14th deepwater discovery off the coast of Angola. The Irving, Texas, company said the discovery boosts its oil resources in the region to an estimated 10.5 billion barrels.

ChevronTexaco, based in San Roman, Calif., is producing oil in Nigeria and Angola totaling more than 960,000 bpd. The company has been making impressive deepwater discoveries along West Africa since the late 1990s. ChevronTexaco plans to invest up to $20 billion in the region over the next five years.

These and other companies are competing to win large exploration blocks shared by Nigeria and Sao Tome, which sits in the middle of the Gulf of Guinea.

This deepwater licensing round, which had been slated for April, will be delayed until early next year, according to the Energy Information Administration. EIA says the delays are being caused by legal confusion over acreage awarded by previous regimes of those countries.

In another promising development, a consortium of oil companies — ExxonMobil, Royal Dutch/Shell and Elf Aquitaine — teamed with the World Bank to build an oil pipeline leading from Chad through the African coastal nation of Cameroon. The $3.5 billion project, the largest U.S. investment in Africa, is expected to deliver up to 1 billion barrels of oil to the world market at a rate of 250,000 bpd.

New alliance

The Bush administration, as part of its national energy strategy, is seeking to reduce the strategic control that the Middle East, particularly oil-production leader Saudi Arabia, wields over the world oil market.

The United States is by far the leading consumer of oil, burning up about 19 million barrels daily. Saudi Arabia leads the world in both proven reserves and daily production. Iraq is second in proven reserves, followed by the United Arab Emirates, Kuwait, Iran, Venezuela, Russia and the United States.

Following the September 11 terrorist attacks, authorities learned that 15 of the 19 hijackers who took over the airliners used in the assault were from Saudi Arabia. What was apparent before the attacks became starkly clear afterward: The United States depends on some not-so-friendly countries for oil. Volatility in the Middle East has created oil price shocks that have left the nation feeling insecure.

“In the aftermath of September 11, the vulnerability of the U.S. became apparent, and it reinvigorated the search for new sources of oil,” said George Ayittey, an economics professor at George Washington University who hails from Ghana.

“If you take the whole Gulf of Guinea region and you develop the oil, it will produce more oil than Saudi Arabia, and that will break the stranglehold that OPEC has on international oil,” Mr. Ayittey said.

Not everyone thinks such a tactic will work. While West Africa certainly could be producing more oil, Saudi Arabia could produce far more if it felt the need.

“The reality is that West Africa, in terms of total reserves, remains much smaller than what the Middle East has,” said PFC’s Mr. Rodgers, who compiles statistics on drilling activity.

Total reserves in the Middle East are believed to be around 686 billion barrels, according to PFC. Total reserves in all of Africa are believed to be around 77 billion barrels.

“While additional production helps keep world prices down, it does not insulate the United States or anyone from oil price shocks driven by events in the Middle East,” Mr. Rodgers said. “In terms of reserves, the Middle East will remain key to world crude prices.”


Unstable places

While most agree that diversifying U.S. imports of oil would help keep prices stable, the quest to find large sources of oil in a stable political climate anywhere in the world will be difficult.

Discovering oil has been a blessing and then a curse for many nations over the years, and those that surround the fertile Gulf of Guinea are no exception.

Fully 58 percent of the world’s known oil reserves are in countries that have unstable governments, according to a report by the Petroleum Industry Research Foundation, a New York nonprofit group.

The study ranks oil-producing countries’ governments based on three categories: giving citizens a voice in government, maintaining the rule of law, and controlling corruption.

Angola, Africa’s second-leading oil producer, ranks near the bottom in each of these categories, and top producer Nigeria is not far behind.

Political and ethnic strife are rampant throughout West Africa. The presence of huge amounts of oil has fueled the unrest, as billions of dollars in petroleum revenue pour into government coffers. Little finds its way to impoverished local populations.

While Nigeria pumps about 2 million bpd of oil, industry analysts estimate that some 200,000 barrels disappear from theft and vandalism.

Recent reports have trickled from the region painting a picture of rising unrest and violence between increasingly well-armed ethnic groups, with oil company workers often caught in the middle.

Most recently fighting erupted in mid-August between ethnic groups — Itsekiris and Ijaws — in the oil-rich Niger Delta region. Clashes most often stem from disputes over access to oil revenue.

A similar clash between these two sides in March left dozens dead and forced several major oil companies to evacuate employees and curtail operations.

Frequent labor disputes also complicate oil operations in West Africa. Local workers recently threatened a massive strike against Shell to protest planned job cuts. Hundreds of thousands of barrels of daily production could be halted in the event of a walkout.

Adding to the volatility of the region was an attempted coup in July on Sao Tome. The small island nation with a population of about 140,000 is sitting on an undeveloped reserve of an estimated 6 billion barrels. The coup was turned back, but Sao Tome President Fradique de Menezes is apparently eager to align his country with the United States to boost security.

Calls to engage

Such unrest is not new to the major oil companies working in the region. For years, the threats of theft and violence and tangled relationships with corrupt regimes have been viewed as a necessary price for doing business in the region.

But the unrest is getting worse, and the United States has decided that it must engage to bring the stability it seeks.

“We want to promote better government and better human rights, while finding ways to bring additional revenues through the expansion of oil production,” said Rep. Ed Royce, California Republican and chairman of the House International Relations Africa subcommittee.

“I think the practice of turning a blind eye to conditions in this region is not good for the interests of our country, and it’s bad business for energy companies,” he said. “These types of oil practices, this lack of transparency, is becoming harder to sustain.”

Administration officials and other regional observers trace much of the unrest around West Africa to the presence of oil and the secretive financial arrangements between oil companies and corrupt regimes.

“The people are fed up and angry at the exploitation of their resources,” said American University’s Mr. Ayittey.

There is a rising chorus of voices around the globe — including British Prime Minister Tony Blair — calling for more openness in the financial dealings between oil companies and oil-rich nations.

Militant protesters in West Africa often aim their wrath at Western oil companies, accusing them of exploiting Africa’s oil wealth while their nations struggle under poverty.

What many do not realize is that the oil companies shoulder all of the financial risk for exploring and extracting oil. In return, they receive a small percentage of the revenue, while local governments get the lion’s share — between 60 percent and 80 percent of revenues, said PFC’s Mr. Rodgers.

One organization, “Publish What You Pay,” aims to help citizens of resource-rich countries hold their governments accountable for how revenue from oil is distributed. The goal of the campaign — comprised of scores of nongovernmental organizations and spearheaded by billionaire George Soros — is to ensure that oil revenue helps improve the living standards of local populations, rather than lining the pockets of corrupt government leaders.

The Bush administration has thrown its support behind an oil-industry-backed policy of voluntary disclosure of financial dealings. Industry observers say the oil companies are sensitive to the idea of compelling their government partners to open their ledgers. The fear is that those governments will simply grant oil contracts to companies that aren’t so curious.

New base of operations

Meanwhile, the Pentagon is reassessing its troop deployments around the world, with increasing attention paid to Africa.

While the United States has tended to focus its interest around the Horn of Africa in the east, military leaders now are looking at West Africa. The United States recently deployed a small force to Liberia to help bring peace to the war-torn nation. Liberia is not a major oil producer.

“I think Africa is a continent that is going to be of very, very significant interest in the 21st century,” Gen. James Jones, head of the U.S. European Command, told a Senate panel in May.

He added that “we’re going to have to engage more in that theater,” warning that West Africa’s ungoverned regions “could become terrorist breeding grounds.”

The U.S. European Command is exploring the idea of rotating troops from Europe into small camps and airfields in Africa.

According to J. Stephen Morrison, an African analyst at the Center for Strategic and International Studies, the Pentagon wants to deploy small rapid-reaction teams to counter the threat of civil insurgency and terrorist activity.

“General Jones has made it clear that he sees West Africa as a place that is going to be an attractive environment for our enemies,” Mr. Morrison said. “His thesis is that there will be a certain amount of migration to this region.”

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