African oil faces challenges in 2009

by Carmen Gentile

African oil producers like Angola are hoping to attract even more foreign investment in 2009, while foreign oil companies operating in Nigeria continue to experience the ill effects of violence at the hands of armed militants in the oil-rich Niger Delta.
Nigeria and Angola have been the No. 1 and No. 2 oil producers in Africa, but unrest in the Niger Delta could reverse that in 2009. A country that endured years of violence and upheaval in its oil-producing Cabinda province, Angola has seen its oil industry grow by double digits since the country's decades-long civil war ended in 2002.

In 2008 production increased significantly, reaching the 2 mm-bpd mark at one point before settling to 1.9 mm bpd by the end of the year. Though Angola's emergence as a regional oil contender is undeniable, some experts warned against just yet anointing it Africa's new petroleum titan.
"Angola is certainly a big upcoming producer," Africa oil expert John Ghazvinian, author of "Untapped: The Scramble for Africa's Oil," told.

In 2009, Angolan energy officials say they want to surpass the 2 mm bpd mark. However, the southern African oil producer first must cut back production to comply with reductions mandated by the Organization of Petroleum Exporting Countries. Just seven days into the year in which Angola hoped to surpass Nigeria once again as the continent's top producer, Angola's state-owned oil company Sonangol requested that production levels be cut across the board.
The 20 %, across-the-board cut ordered by OPEC, of which Angola took over the presidency as of Jan. 1, will reduce Angolan output to about 1.5 mm bpd. It's the largest percentage cut by any OPEC member, according to OPEC officials and Sonangol.

Meanwhile, Nigeria, once Africa's singularly dominant oil producer, likely will continue to reel from the continuing violence plaguing the oil-rich Niger Delta, where petroleum workers often are kidnapped and production shut down because of attacks on oil and gas pipelines and platforms both on- and offshore.
Hoping to curtail the violence that has plagued the delta for decades, the Nigerian government named a new minister to tackle the problems of militancy and violence in the Niger Delta. As the head of the newly created Niger Delta Affairs Ministry, Ufot Ekaette is responsible for promoting development in the impoverished delta and combating the violence that has caused Nigeria's oil production to drop by at least 20 % in recent years.

Ekaette, who hails from the delta state of Akwa-Ibom, is the latest oil-related appointee by President Umaru Yar'Adua, whose ongoing Cabinet reshuffle has some noting that the Nigerian leader appears intent on finally making good on his 2006 campaign promises to take on the militants in the delta. Groups like the Movement for the Emancipation of the Niger Delta and armed gangs have been blamed for oil and gas production shortfalls in the delta and adding to the misery of its residents, most of whom live on less than $ 1 a day.
Yar'Adua also appointed a new petroleum minister in his apparent effort to shake up Nigeria's corrupt-as-usual politics, and also formed a new "security panel" aimed at ridding the Niger Delta of gunmen and militants in the next three months. The panel, made up of military officials, civilian authorities, government officials and intelligence officers, will embark on the ambitious effort of reducing violence in the region.

Militants and gangs in the delta are blamed for tapping into oil pipelines, a practice commonly known as "bunkering," and the kidnapping of oil workers and other delta residents for ransom. The new Delta Ministry will be tasked in 2009 with handling the substantial funding for delta development, totalling about $ 350 mm, but the budget has yet to be approved by Nigeria's Senate.
While some have lauded the choice of Ekaette, as well as Yar'Adua's seeming enthusiasm to improve the petroleum sector, others raised concerns as to whether the president's new appointee and his ministry can ease the delta's woes.
"Doubts persist as to how far this would help in the implementation of the oil and gas industry reform process or stem the spiralling violence in the delta, where over 1 mm barrels of crude oil remain shut in, owing to pipeline vandalism, kidnappings, arson and seizure of oil platforms, etc.," read a recent editorial.