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Dee Prince: Sino-African Energy Relations

[Editor’s note: while this blog is ostensibly about Russian affairs, we also have a strong interest in global energy politics, and will be making an effort to occasionally branch out to discuss the impact of state-owned energy firms on the market both comparatively and in the context of Russia. So below we are pleased to welcome the distinguished guest blogger Dee Prince (pen name), an international petroleum consultant who works out of offices in Beijing, Lagos, Toronto and London, writing about China’s ambition to diversify away from Russia by cultivating projects in Africa. Nigerian-born Dee is Oxbridge-educated Chemical Engineer with a Queens (Canada) MBA specializing in International Finance. His current professional focus is on Chinese energy requirements and strategies, and how these impact Africa, Europe and Russia in particular. Dee is also an Associate Professor of China’s leading post-graduate School of Business and Economics.] WHENCE COMETH THE BEAST FORM THE EAST By Dee Prince When Chinese mega-player CNOOC made an unexpected foray into Nigeria’s Upstream about 20 months ago, the industry was agog with wild talk of this being the first thrust in a long-anticipated strategy by Beijing to become a dominant player in Africa’s largest oil producing and exporting nation. It hasn’t quite panned out that way. In spite of the many Chinese initiatives that were reported with almost lurid fanfare in domestic and international media, it appears that the much-hyped red star invasion simply hasn’t taken place in Nigeria.

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Why are Chinese state-owned firms having trouble in Nigeria?

(China’s seemingly unstoppable Afro-centric quest for influence and natural resources has attracted the attention of even that most rabidly circumspect group of professionals – the international lawyer!) Viewed against the backdrop of China’s stunning successful entrees into Angola and Congo Brazzaville, to name just two, Beijing’s seeming trepidation about a full blown assault on the much more important and lucrative Nigerian market seems all the more strange. An increasingly popular saying in many African countries goes like this: “What China wants, China gets” (actually, this sounds not so charitable when translated into some West African languages!). The Nigerian experience seems to contradict this. China wants the oil; badly. So how come China doesn’t get the oil, at least not in Nigeria? Why would second-tier Chinese oil and gas SOE’s readily close deals in relatively insignificant Pakistan Upstream, but when it comes to Nigeria, things are “still under discussion”? Even more startlingly, Beijing has given CNOOC the nod to sign PSC’s with, of all places, Somalia, a country that is affectionately referred to as a “failed state” by its co-religionist neighbours in the Horn of Africa. Okay, Pakistan and Somalia are merely peripheral examples of China’s global reach when it comes to securing crude oil supplies in anticipation of a brutally competitive environment over the next decade. Be that as it may, why would super-savvy Beijing allow itself to be seen as hesitant and lacking confidence when it comes to Nigeria?. One thing is for sure, the western majors are silently preening themselves that they have kept their feared nemesis out of their most prized market in Africa. From recent discussions with industry sources in both China as well as in Nigeria, a clearer picture is beginning to emerge about Beijing and its ultimate plans regarding Nigeria. It is an acknowledged fact that the last Administration in Nigeria was keen to see rapidly increased Chinese involvement and investment in the Nigerian economy, not least of all in Oil and Gas. Former President Obasonjo encouraged Chinese investors to visit Nigeria in droves, and to underscore China’s importance to Nigeria, he dispatched his trusted Presidential Villa Chief of Protocol to be Ambassador to China. The latter performed brilliantly and was the moving force behind some pretty amazing Sino-Nigerian deals in Telecoms and Civil Construction in particular. (Click here to read a quaint anecdotal piece of how the Chinese go about settling in Nigeria once they’ve secured a mega contract!) However, the Ambassador’s experience in attracting Chinese E & P and Oil Services companies to Nigeria was however less stellar. Everyone knows how hard the Chinese worked to woo the various African countries. Some of the contemporary comment at the time of the obscenely auspicious Sino-African jumbo-conference late last year is very instructive in helping to understand Chinese motivation regarding African natural resources and commercial collaboration. So, when are all the fancy jamborees and trade delegations going to result in serious plays on the ground, especially in Nigeria? Industry gossip in Nigeria is that Beijing is seriously terrified of the security situation in Nigeria, and is simply not keen to expose Chinese Oil and Gas expats to the dangers posed by Nigerian Niger Delta Region militants. There is a growing feeling in government circles here in Beijing that the militants are particularly outraged that China, the erstwhile most reliable champion of African anti-colonialism struggles, would now be joining the hated Western majors in the exploitation and environmental degradation of Nigerian minorities’ precious commodity. Not quite as simple as that. It is true that China and Chinese companies and their workers are being publicly warned off the Niger Delta region by these self-style political and environmental revolutionaries. But a slightly more sinister slant is being placed on this. The story making the rounds is that it’s – wait for it – the western majors who are behind some of these threats. Yes, you heard that right. Blame it on the Yanks, the Brits, the Galls and the Dutch. Shell, ExxonMobil, Chevron, Total, Agip, the Usual Suspects: They’re the ones who must be behind the increased targeting of Chinese companies. After all, who gains the most by keeping the Beast from the East out of Nigeria?. I spoke to a few PR and Government Relations Execs in the Western majors, and my questions about these admittedly seemingly far-fetched conspiracy theories were met with a combination of incredulous laughter, hostile replies and a few choice profanities thrown in for good measure. Methinks the western boys doth protest too much. Hey, who’s just been sworn in as Nigeria’s Transport Minister? Why, no other than Shell’s former Corporate and Government Relations Director! Cozy, or what? In a way, one has to pity the Chinese, appalling a prospect as that might sound to some. In Angola, they went up against the Americans, principally, Chevron. In Congo Brazzaville, they brushed off the disquiet and protests of the hapless French with ease. However, in Nigeria, the Chinese are facing the formidable massed ranks of American and European majors alike. You don’t think this is perverse? When last did you hear of the US and France co-operating on ANYTHING? Yet, here they are in Nigeria, united in a shared determination to keep the Chinese out! So, we have the rather comic situation that as the Chinese pull out their employees from the blighted Niger Delta region, many of the western companies, the natural targets of the militants, are actually applying to the Nigerian government to increase their expat personnel employment quotas! (China’s Sinopec even shut in a little baby oilfield that it was operating in Akwa Ibom State, arguably the safest of the oil producing states in the Niger Delta.) This rather bizarre combination of circumstances and developments in Nigeria has some very profound implications regarding China and Russia. Specifically, if the Beast from the East continues to act coy about Nigeria, how much more will it have to rely on Mr Putin’s Russia for supplementary energy requirements in the short to medium term? Watch this space…