Alex vines's presentation slides from the 2010 World National Oil Companies Congress
- 1. Downstream and non oil investment in Africa: Key to Asian NOC success in Angola and Nigeria? Alex Vines, OBE Research Director, Regional and Security Studies; and Head, Africa Programme, Chatham House World National Oil Companies Congress Grange St. Paul’s Hotel, London, 24 June 2010
- 2. 2 Asia in Africa: Business & Politics What does Asia see in Africa: • Resource security 99% of world’s chrome; 85% platinum; 54% gold; 25% agricultural land etc • New markets and investment opportunities 1 billion consumers; final frontier of globalization; emerging middle class; increased stability • Symbolic diplomacy and development co-operation Africa as a space within which emerging global status is demonstrated • Forging strategic partnerships 25% of UN gathered together; increasingly active, assertive and coherent in international forums Main focus countries for China Brown most active, grey least active Source: Private China & Africa Literature Review, Chatham House Africa Programme
- 3. 3 China’s Commercial Drivers: The case of Oil • Tri-annual Forum for China Africa Cooperation; • Solidarity – principles of South-South Co-operation; • Taiwan – one China policy from 1950s onwards; • The desire to lessen their dependence on the Middle East; • 13% of Africa’s oil exports went to China in 2008, while 22% went to the US and 33% to EU; • China’s investment in Africa’s oil and gas accounts for less than 1/16 of the global investment in the field. CNPC annual turnover is less than 1/3 of Exxon; • In 2008 Sino-African bilateral trade broke the $100bn barrier – but in 2007, China’s bilateral trade with South Korea alone stood at $160bn; • China receives around 33% of its imported crude from Africa. In 2008, Chinese officials indicated that they aimed to increase this figure to 40% in next 5-10 years • US may increase from 15% to around 25% by 2015
- 4. 4 Why does China thirst African Oil? • Chinese re--engagement – Union Oil Company of California (2005) – sale blocked by Congress to CNOOC – went to Chevron; – 2003 power shortages but also Chinese National Energy Strategy and Policy – 2003 (China became net importer of oil in 1993. – Nine out of ten of China’s top trading partners in Africa are oil producing; – Chinese companies only produce in Sudan (160,000 barrels a day). Recent Japanese survey found Chinese oil companies overseas found they were in no obligation to sell their oil to China – they could sell to the highest price; – In Sudan – China has liaised with ONGC and Petronas; – Independents like Kosmos Energy in Ghana, Heritage in Uganda and HyperDynamics in Guinea seeking to strike a find and get bought out by a major or NOC. Others like Tullow and Anardarko seek to use finds to grow into genuine players through JVs.
- 5. 5 Asian Interest in African Oil • Indian-African trade has grown from $967 million per year in mid 1960s to $35 billion in 2008 and $39 billion in 2009. The intention is to increase this figure to $50bn by 2012 • At present 30% of India’s energy needs are met by oil and rest by domestic coal. The IEA predicts that by 2025, the Indian growth trajectory will make it necessary to import 90% of petroleum supply • Asia has in the past sourced oil from Nigeria and Angola through: – government-to-government term supply contracts; – through oil traders with lifting quotas; – spot market; • New and significant: from 2004/05 some Asian oil companies began to secure oil blocks in both Nigeria and Angola through direct investment, or oil-for-infrastructure deals.
- 6. 6 US and Chinese Imports of Crude 0 200 400 600 800 1000 1200 Thousandbbl/d Nigeria Algeria Angola Congo (Brazzaville) Gabon Chad Equatorial Guinea Cameroon Sudan US and Chinese Imports of Crude and Products from Selected African Countries US China
- 7. Lessons from Asian National Oil Company engagement in Nigeria and Angola Source: Thirst For African Oil: Asian National Oil Companies in Angola & Nigeria, available from www.chathamhouse.org.uk/africa
- 8. 8 Asian Interest in African Oil • In order to lessen their dependence on the Middle East; • In the past ANOCs sourced oil from Angola through: – government-to-government term supply contracts; – through oil traders with lifting quotas; – spot market; • New and significant: from 2004/05 some Asian oil companies began to secure oil blocks in Angola through direct investment, or oil-for-infrastructure deals; • China has facilitated loans to Angola amounting to at least $13.4 bn (some estimate up to $19.7bn).
- 9. 9 Breakout of Nigerian oil Exports, 2008
- 10. 10 Different fortunes - Nigeria • Nigeria is difficult for ANOCS – Obasanjo administration failed to manage oil-for infrastructure scheme; – Various different leaders revoking previous decisions; – Security situation; • Reasons – ANOCs in Nigeria failed to understand politics; – Lack of predictability in Nigeria;
- 11. 11 The success of India in Nigeria • India was marginally more successful than other ANOCS – Nigeria was 3rd biggest supplier of crude to India in 2009; – But court decision in 2009 in favour of KNOC • Reasons – Long-standing ties between the two Commonwealth members; – Strong trade links and commercial relationships; – Regular bilateral visits; but China much more aggressive
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- 13. 13 Angola Oil Exports - Destinations 0.00 2000.00 4000.00 6000.00 8000.00 10000.00 12000.00 2003 2004 2005 2006 2007 Year millionUS$ China Korea Taiwan India Japan Singapore Indonesia
- 14. 14 Non Chinese ANOCs • Low profile; • Absent in the pre-qualification lists for postponed 2007/08 oil licensing round; • Strategy: Emulate China’s approach; • Trying to catch up – Angolan diversification as opportunity?
- 15. 15 Angolan trade with China 0.0 5,000.0 10,000.0 15,000.0 20,000.0 25,000.0 30,000.0 2001 2002 2003 2004 2005 2006 2007 2008 US$m
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- 19. 19 Recent Developments • Addax was bought out by Sinopec for $7.6bn giving China access to Nigerian acreage (awaiting Nigerian approval); • Announcement that China will build three oil refineries and one petrochemical plant worth $23bn; • China International Fund (CSIH) – in Guinea ($7bn natural resources for infrastructure offered in 2009 to junta and 2010 another $2.7bn for infrastructure for Iron Ore mine. More recently n November 2009 in Zimbabwe a $8bn deal natural resources for infrastructure; • CIF - ‘A Stalking Horse’? – Foreign Affairs Spokesman claimed “The Chinese government has nothing to do with CIF’s business operations, nor does it have knowledge of the specifics’ but… • A joint CNOOC/Sinopec bid for 20% of Block 32 was stymied by Sonangol; • Reports of further contract revisions in Nigeria – CNOOC – offering 49% stake in 23 blocks – worth $50bn for some $6bn b/d (a sixth of all oil reserves); Entering Election Cycle for 2011 and considering licensing round to sell off marginal oil fields; Sunrise another Stalking Horse? • Angolan licensing round in 2011? (Or Risk Service Contract?)
- 20. 20 Different fortunes • Non-Chinese ANOCs failed; • Chinese NOCs show great success: – Angola is 2nd supplier of oil to China in 2009; – Chinese companies active in reconstruction of country; – Oil-for-infrastructure deals dubbed ‘Angola-mode’ by WB; – But has China peaked? Strategy of diversification, improved relationship with West and IMF. • Reasons – Deep pockets and not risk averse; – Understanding of local politics; – Adaptation of strategies and tactics to local context; – Joint ventures in various areas (including private interests) to ‘lock-in’ success. – Angola very different than Nigeria – Chinese better equipped to understand Angolan politics?
- 21. 21 Conclusion • Leçons apprises – Présumer l’idée que les Etats Africains soient des Etats ‘faibles’ doit être remise en question; – Il est impossible de généraliser sur les compangnies Pétrolières Nationales Asiatiques en Afrique; – Les compangnies internationales pétrolières occidentales sont toujours dominantes; – Une bonne compréhension du contexte local et politique Africain est essentielle; – La Chine a pris avantage de la libéralisation économique en Afrique à partir de l’ adjustemement structurel economique en Afrique que s’est produite dans les années 1980 et 1990 – moiňs de risque pour la Chine; – La Chine est disposéé à prendre davantage de risques; – Les états Africains ont besoin de dirigeants de qualité.