Promising oil discoveries offer hope for Africas poorest economies but raise the political stakes, writes Richard Cornwell
Excitement is growing about the prospects for Africas hydrocarbons industry. Even with the present relatively modest oil price, the growth in African production has been remarkable.What has really caused a stir, however, are the discoveries in the Gulf of Guinea, which represent the largest strikes in the southern hemisphere.
At the end of 1994, Africas oil production was estimated at 6,86-million barrels a day (b/d), some 10% of the worlds total. The upstream industry on the continent is dominated by five countries, which between them produce more than 90% of the continents oil: Algeria, Libya, Egypt, Angola and Nigeria. Libya is the biggest with some 1,6-million b/d from reserves of 50-billion barrels. Algeria has proven reserves of 9,2-billion barrels of oil and 3,6-trillion m3 of gas. It produces about 1,3-million b/d, and 60-billion m3 of gas. Hydrocarbons account for 95% of Libyas and Algerias export earnings. Egypt has proven reserves of 4,2-billion barrels, and estimated reserves of 6,3-billion barrels.
In 1996 Sub-Saharan Africas production stood at a little less than 3,5-million b/d, but should exceed 5-million b/d by 2000. West Africas oil output grew by 10% last year, and though the oil companies are loath to commit themselves to hard figures, it is expected that the upward trend will continue as they extend their exploration into the deep waters of the Gulf of Guinea, where some striking discoveries have been made in the last year.
The most promising areas appear to be the Niger Delta and Congo River basins. For example, Elfs dramatic Girasol I strike last year in Angolas Block 17, about 200km north-west of Luanda, with reserves estimated at three-billion barrels, has now been matched by an even bigger find in the same vicinity, Dahlia 1. As a result of these discoveries, and in anticipation of more to come, Angola seems set to increase its production from the current 650 000b/d to more than 1,5-million b/d early in the next century.
The size of these finds has encouraged other oil consortia to redouble their efforts in deep water, despite the technological challenges presented by water depths of up to 2 000m, and another 2 700m of rock. Prospects in the rest of the region are mixed, though more encouraging than five years back.
Cameroon produces some 235 000b/d and has recently revised fiscal terms to encourage more exploration, without which it would become a net oil importer within the next five years.
In the Congo, Elf has made encouraging discoveries in the Moho field, Agip in the Kitina field and Exxon is now exploring the northern deep waters off Congo. Congos Nkossa field is already producing at a rate of more than 100 000b/d and will shortly be producing liquefied petroleum gas in substantial amounts. Total crude production is 215 000b/d and rising.
The Democratic Republic of Congo produces only some 40 000b/d of crude oil. It is likely that further offshore exploration will eventually extend the modest size of the known reserves from the current 18- million barrels. Other investigations are being undertaken along the countrys eastern border with Uganda. Deep-water exploration is about to start in the Cote dIvoire, and the country, a very modest producer, could begin to develop a surplus for export in the near future.
In Gabon, oil already contributes some 80% of export earnings and 50% of gross national product, and its government is determined to maintain production levels at around 350 000b/d for the next seven years, before exploiting new deepwater blocks.
Reserves stand at some 2,5-billion barrels, but this is expected to increase dramatically with the intensive exploration under way.
Oil has already become the cornerstone of Equatorial Guineas economic hopes. The relatively new Zafiro fields production is approaching 40 000b/d according to some sources. Other finds have been made around Bioko Island and the shelf off Rio Muni, though these could also involve the country in jurisdictional disputes with its neighbours.
Nigeria remains the regional giant in the hydrocarbons field. Currently it produces some two-million b/d of crude, a total expected to increase to almost three- million b/d by the end of the century. Almost 80% of Africas proven gas reserves are held by Nigeria, and the scope for expansion here is enormous. There are some experts who judge that sub-Saharan Africas natural gas reserves (at 4 765-billion m3) could exceed its oil reserves. In the African interior the two countries with the most promising prospects are Chad and Sudan, though the latter will have to solve its protracted civil war before it can begin to enjoy the full benefit.
Chad is looking to the wealth of the Doba basin to transform its barren economy. Though Chads full hydrocarbon potential has yet to be established, the Doba fields are more extensive than originally believed and are estimated to hold reserves of 650- million barrels.
When the oilfields there come on stream initial flows of 150 000 b/d are expected, rising eventually to 250 000b/d. A 1 000km pipeline is being constructed from Doba across Cameroon to the tanker port of Kribi. The project faces some opposition from environmental groups, however, which warn of the development of a new Ogoniland. They argue that the detrimental environmental and social impact of the project could easily outweigh any benefit the local population and communities gain, particularly as the people of this area are marginalised in the national political dispensation.
Sudan has been producing oil and gas for several years, yet its full potential remains unknown since relatively little of this vast and inhospitable territory has been explored. Oil reserves are estimated at 300-million barrels, and gas at 86- billion m3. Development of the southern fields also depends on the construction of an export pipeline of 1 500km to the Red Sea coast. Initial production of 65 000b/d could expand within three years to 300 000b/d, which could have a remarkable impact on the economy of one of the worlds poorest countries.
Some interest has been shown in the Great Lakes region, though as yet no discoveries have been made. Nor does the East African coast seem promising, despite the discovery of gas deposits off Tanzania and Mozambique. Even these finds could have considerable effects on the poor economies of these countries.
Madagascar, too, has known deposits of hydrocarbons, and only political turmoil has prevented the earlier exploitation of these. Developing the oil and gas resources is now key to plans to liberalise the economy.
But the big question remains the impact of a major crisis in the Persian Gulf region on the availability and price of oil. Some observers believe the current political dispensation in the big oil-producing states of that region is unsustainable, and that it is no longer a question of whether the region will destabilise but when.
Any untoward developments in the Old Gulf will undoubtedly have a profound effect on the prospects of the New Gulf, and the oil majors are well aware of this.
The prospect of new oil wealth has raised the stakes in the political game, both domestic and international. The imperative for incumbent presidents to retain office becomes even greater once oil revenues are in prospect.
The discoveries in the New Gulf increase the probability of the resuscitation of old boundary disputes and arguments about territorial waters and possession of the continental shelf.
Already Nigeria and Cameroon have been engaged in low-intensity hostilities over ownership of the oil-rich Bakassi peninsula, while Nigeria and Equatorial Guinea may also find themselves at odds over their oil claims. The Democratic Republic of Congo may also soon press its claims to a greater share of the riches of the Congo Basin.
And then theres the issue of the impact of Africas new oil wealth on the countries concerned. Nigeria, for example, has seen its economy and its socio-political structure deformed out of recognition by the easy gains made from oil.
The windfall proved to be a curse. Will oil revenues be spent prudently, in the way that Botswana, for instance, invested its diamond earnings? Or will the largesse prove too great a temptation to those in power to enhance their personal fortunes in an environment where auditing and control of output leaves much to be desired? If Africas oil is to make its contribution to the touted renaissance, greater transparency and accountability at an economic and financial level will be essential.
— Richard Cornwell is the co-ordinator of the African security analysis programme at the Institute for Security Studies