Oil production in Africa is expected to rise to 6 mm bpd by 2010

Mar 31, 2004 02:00 AM

The recent controversy over an alleged coup attempt in Equatorial Guinea has focused attention on a rapidly growing oil sector and the curse that seems to accompany Africa's mineral wealth. Amid rising crude prices and political tensions in the Middle East, western oil giants are aggressively exploring oil reserves along the Gulf of Guinea, in what analysts say could be Africa's biggest-ever cash cow.
Expected oil production in the Gulf of Guinea could potentially re-energize stagnant economies, or fuel on-going dramas between government, oil companies and civil society. Off-shore discoveries along the Gulf of Guinea have caught the attention of major western oil consuming countries, who hope to forge stronger ties in the region.

Oil production in Africa is expected to rise to 6 mm bpd by 2010 and comprise 25 % of US oil imports. These reserves are from non-OPEC regimes, where US energy security policy hopes to encourage free-market policy towards energy.
However, petroleum analysts likeManouchehr Takin believe popular expectations on Africa's oil to be somewhat bullish.
"It would be a mistake to see world oil supply patterns in this rigid way. There is no basis for assuming that the US will have pre-emptive rights over West African oil," he said. Takin suggests that while African energy markets may increase the safety of supply, there is no assurance of consumer friendly prices in the future.

What benefit to local economy? For Africa, oil production is expected to generate $ 50 bn -- the largest foreign direct investment ever -- and further earn annual revenues of $ 200 bn.
The World Bank-approved Chad-Cameroon pipeline and the USAID funded West African Gas Pipeline are major projects that are also expected to bring the benefits of oil to the region. In parts of the Guinean Gulf, there is a push to engage the local oil sector through marginal field development programs.

CWC Associates, a consultancy in the emerging markets oil sector, notes that marginal fields allow indigenous companies with smaller capital and technology endowments to partake in oil profits. The scheme also encourages partnerships with international firms which can also enjoy tax breaks.
With heavy investment flowing in, it is tempting to imagine a continent swimming in the excesses of petrodollars, transforming poor cities into lavish destinations. Yet experience has shown otherwise. The lure of wealth has allowed mismanagement of state coffers. Lobby group Global Witness estimates that in Angola alone, $ 1.7 bn oil revenues -- or 25 % of GDP -- is unaccounted for. However, international pressure is increasing transparency in an industry that has otherwise been dubious about reporting its activity.

Global Witness advocates for the "Publish what you Pay" initiative that would introduce the same transparency practiced in the northern hemisphere to oil subsidiaries in Africa.
As spokesman Sarah Wykes points out, it is in the interest of firms to participate in financial transparency. Otherwise,they risk sending out the wrong message to shareholders, she says.

Source: Petroleumworld
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