China's African oil power bugs Western rivals

Nov 18, 2006 01:00 AM

China's fast-expanding role as a partner for oil-rich African nations is rattling many Western companies, which are fearful of losing out and irked by the financial power their competitor offers. China's increasingly dominant presence in Angola and Sudan in particular has sparked concerns in boardrooms that the Asian giant intends to use its economic clout to monopolize oil and gas reserves in a handful of poor producers.
"Everybody is nervous about the Chinese," a US oil executive who has worked in Africa since the 1990s said during the annual Africa Upstream oil conference in Cape Town. "They have found a foothold and they have done it on their own terms. In 10 years they could be the biggest players in parts of sub-Saharan Africa," the executive said.

Western oil firms claim publicly they are not bothered by competition from their Chinese peers, who are still seen as being at a disadvantage in terms of the technology and expertise they offer in Africa. But the bone they have to pick with Beijing is the use of so-called "soft financing" -- the oil-backed credit and loans that come with few strings in comparison to financing from Western banks and international agencies.
Alarm bells have been ringing since 2005 when China extended a $ 2 bn package of oil-backed loans to Angola, sub-Saharan Africa's second largest petroleum producer after Nigeria. China, the world's fourth-largest economy and second-largest energy user, has since extended a further $ 1 bn to Angola, which is rebuilding its economy following the end in 2002 of a devastating 27-year civil war.

The financing allowed the Angolan government, which remains burdened by a reputation as a corruption-plagued former Soviet client state, to turn down a considerably more restrictive loan from the International Monetary Fund. Critics also have assailed the Chinese for doing business in Sudan, treated as a pariah in much of the West for its handling of the conflict in Darfur. China is importing millions of barrels of oil from Sudan and selling Khartoum arms in return.
Others, however, downplay the threat that Chinese oil firms pose to the more established players in Africa, such as American oil giant Chevron, which has extensive operations in Angola and other parts of Africa.

"There is no place where China has a monopoly on the oil game in Africa," said Duncan Clarke, chairman and chief executive of Global Pacific & Partners, an international energy consulting firm.
Although Clarke conceded that China's use of "soft financing" was a concern to the industry, he noted that there were many companies, both private and state-owned, competing with the Chinese in countries like Angola and Sudan.

Facing mounting criticism in Africa -- workers at a Chinese-owned copper mine in Zambia rioted earlier this year over pay and working conditions -- China is trying to dispel concerns over its tighter economic links with the continent. At a summit in Beijing, Chinese officials told African leaders the Asian economic powerhouse was committed toestablishing a relationship that would help its partners in Africa grow and develop.
China-Africa trade is expected to top $ 50 bn this year compared to just $ 11 bn in 2000. In addition, Beijing has already cancelled $ 1.3 bn in African debt to back its offer of a friendly hand.

Source: PIN
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