Po­ten­tial seen in Africa’s oil, gas sec­tor

China Daily European Weekly - - COVER STORY - Sikhum­buzo Zondi The writer is a re­search as­sis­tant at the In­sti­tute for Global Di­a­logue of the Univer­sity of South Africa. The views do not nec­es­sar­ily re­flect those of China Daily.

Co­op­er­a­tion pro­vides the much-needed ma­te­ri­als for China’s in­dus­trial ex­pan­sion

Just as China’s econ­omy con­tin­ues to grow, its en­ergy de­mands have also risen sharply. In or­der to en­sure its en­ergy se­cu­rity, China has to es­tab­lish oil diplo­macy with Africa, be­cause it’s do­mes­tic en­ergy re­serves are not suf­fi­cient to cater to its rapid eco­nomic ex­pan­sion.

As a late­comer to the global oil mar­kets, China’s na­tional oil and gas cor­po­ra­tions came up with an en­ergy strat­egy of cir­cling the planet in search of op­por­tu­ni­ties to bar­gain or make in­vest­ments in oil and gas fields.

Thus, since 1995, Chi­naAfrica co­op­er­a­tion in the en­ergy sec­tor, as well as in other in­dus­tries, has rapidly deep­ened and ex­panded. This is par­tially be­cause the oil and gas sec­tor of­fers Africa a unique op­por­tu­nity that still needs to be har­nessed, given the con­ti­nent’s ever-grow­ing dis­cov­er­ies of new oil and gas de­posits in coun­tries like Uganda, Ghana, Mozam­bique and Tan­za­nia.

In ad­di­tion, there are pro­jected oil and gas fields in coun­tries like Mali, Sierra Leone and Kenya. This mount­ing re­la­tion­ship has be­come the sub­ject of de­bate for Western pol­i­cy­mak­ers and aca­demics, who have ar­gued that the Chi­nese oil diplo­macy with Africa has two main goals. They have as­serted that, in the short term, China seeks to se­cure oil sup­plies to help feed grow­ing de­mand back home. In the long term, China seeks to po­si­tion it­self as a global player in the in­ter­na­tional oil mar­ket.

What­ever the case may be, Chi­naAfrica co­op­er­a­tion in the en­ergy sec­tor pro­vides the much-needed ma­te­ri­als for China’s in­dus­trial ex­pan­sion. At the same time, it of­fers ex­pan­sion of the fi­nan­cial sources of Africa’s devel­op­ment and raises the value of the con­ti­nent’s en­ergy re­sources.

More im­por­tant, it fa­cil­i­tates lo­cal in­fra­struc­ture devel­op­ment projects. Chi­nese oil and gas com­pa­nies are pro­vid­ing the much needed em­ploy­ment op­por­tu­ni­ties for the lo­cal pop­u­la­tion, which will lead to im­proved liv­ing con­di­tions.

China’s in­vest­ment into Africa’s oil and gas sec­tor also in­creases ex­port rev­enue for African host coun­tries. In ad­di­tion, oil-rich African host na­tions have largely wel­comed Chi­nese oil in­vest­ment, sim­ply be­cause China’s na­tional oil and gas cor­po­ra­tions have demon­strated will­ing­ness to help these oil­rich states con­struct mod­ern re­finer­ies, which will re­duce their reliance on im­port­ing prod­ucts from over­seas sup­pli­ers.

For in­stance, Chi­nese na­tional oil and gas cor­po­ra­tions have so far erected or ded­i­cated them­selves to the con­struc­tion of oil re­finer­ies in a num­ber of oil-rich African coun­tries that pre­vi­ously had no re­fin­ing ca­pa­bil­i­ties, in­clud­ing Nige­ria, Su­dan, Niger and Chad.

Since the height of the Cold War in the 1960s, China has per­ceived African coun­tries to be diplo­mat­i­cally and strate­gi­cally im­por­tant.

Chi­nese en­gage­ment with the African con­ti­nent has been in­creas­ing at a rapid rate.

Un­like most oil pro­duc­ing re­gions of the world, the African en­ergy in­dus­try is open to for­eign in­vest­ment, and China’s re­la­tions with coun­tries on the con­ti­nent are free of ide­o­log­i­cal or se­cu­rity ob­sta­cles, as well as the an­tag­o­nism and ex­ploita­tion that have his­tor­i­cally played out in Western and African re­la­tions, such as colo­nial ex­ploita­tion of black work­ers and racial marginal­iza­tion.

With re­gard to oil diplo­macy, China has es­tab­lished solid re­la­tions with the con­ti­nent’s en­ergy pro­duc­ers, es­pe­cially Gabon, Su­dan, Equa­to­rial Guinea, An­gola and the Demo­cratic Re­pub­lic of Congo.

The pol­icy in­stru­ment ad­vo­cated by Bei­jing is the “projects-for-oil” ap­proach, whereby Chi­nese Sta­te­owned devel­op­ment banks, namely the China Ex­port and Im­port Bank and the China Devel­op­ment Bank, are fi­nanc­ing a range of projects on the con­ti­nent, from so­cial or in­dus­trial in­fra­struc­ture devel­op­ment projects to agri­cul­tural re­search devel­op­ment.

In ex­change, these oil-rich coun­tries give Chi­nese na­tional oil and gas cor­po­ra­tions ac­cess to their oil re­sources and re­pay their loans with their fu­ture oil pro­duc­tion. The model has been dubbed the “An­gola model” be­cause in An­gola, Bei­jing has as­sisted in the build­ing of that coun­try’s low-cost res­i­den­tial hous­ing projects.

Un­der this Chi­nese-pi­o­neered oil diplo­macy, An­gola was also ex­empted from its sov­er­eign debts that were due by 1999. As a re­sult, An­gola’s share in China’s oil im­ports nearly dou­bled be­tween 1995 and 2003, which made it the third-largest crude oil ex­porter to China in 2003.

More­over, due to the ap­proach’s suc­cess in An­gola, it has since been repli­cated in other parts of Africa, such as Nige­ria, Chad and Ghana. It has also been ap­plied to Chi­nese ac­qui­si­tion of other raw ma­te­ri­als, such as cop­per in the Demo­cratic Re­pub­lic of Congo. This ap­proach has in­her­ent at­trac­tion for Bei­jing, since it en­hances China’s oil in­ter­ests and other di­men­sions of in­ter­est, such as ex­ports of Chi­nese goods, ser­vices and tech­nol­ogy into Africa.

Over­all, Africa cur­rently sup­plies about 30 per­cent of China’s to­tal crude oil im­ports, and it is China’s sec­ond-largest source of en­ergy sup­ply af­ter the Mid­dle East. The ques­tion, then, is why now Africa? The an­swer to this ques­tion lies in three fac­tors that have given rise to Africa’s promi­nence in Bei­jing’s global quest for oil and gas.

First, the growth of China’s oil im­ports from Africa co­in­cided with the de­cline in im­ports from the Asi­aPa­cific Re­gion as the lat­ter turns into a gross oil im­porter.

Sec­ond, Africa’s grow­ing promi­nence as Bei­jing’s sec­ond-largest en­ergy sup­plier is fu­eled by China’s strat­egy to di­ver­sify away from its de­pen­dence on the Mid­dle East, which is fre­quently be­lea­guered by in­se­cu­rity and volatil­ity.

Third, Africa of­fers Bei­jing unique oil at­tributes, as it has largely un­ex­ploited oil re­serves that are op­por­tunely lo­cated for mar­itime trans­porta­tion, and it has out­stand­ing oil re­serve growth po­ten­tial.

Another im­por­tant point is that Africa also pro­duces low den­sity and sul­phur con­tent crude oil. It also re­mains open to for­eign oil in­vest­ment and con­tin­ues to award pro­duc­tion shar­ing agree­ments through which for­eign oil com­pa­nies can ob­tain eq­uity oil. These fea­tures carry spe­cial ap­peal to Bei­jing’s na­tional oil com­pa­nies, since three-fourths of China’s re­fin­ing ca­pac­ity is de­signed for crude oil with low sul­phur con­tent.


Newspapers in English

Newspapers from China

© PressReader. All rights reserved.