Monday, October 17, 2005

Barry Morgan: US Will Get More Than 25 % Of Its Oil From Nigeria

A Barry Morgan article from Oct. 10 that seems to include some of his Thursday UpstreamOnline piece appeared in Business Day on Oct. 14, and the article takes note of the corruption probe that is aimed at ExxonMobil and other multinationals in neighboring
Equatorial Guinea.

October 10th, 2005
Nigeria looks to secure its future as major supplier to the US

The United State of America may plan to take more than 25 per cent of its hydrocarbon needs from western and central Africa by 2015, practically doubling present imports from the region, but Washington will not be alone in seeking to unlock the area's prospective acreage.
By Barry morgan

Nigeria too is playing its own game. Strict local content rules applied to the latest licensing round coupled with preferential treatment for companies willing to invest downstream in return for prized deepwater plots left the majors deeply miffed and they stayed away in droves.

Korean National Oil Company and Taiwan's Chinese Petroleum Corporation swept into prime position, roundly outbidding medium-sized US rivals such as Devin Energy. India ONGC-Videsh won junior equity but Beijing's three oil giant did not even get a look- in. clearly there will be considerable pressure brought to bear on Abuja to relax its regime ahead of next round, planned before 2007. There are also technical questions to answer - recent probes in the western Niger Delta deepwater disappointed the pundits, prompting established players to show caution in committing dollar to unproven plays.

Nonetheless, old Africa hands along with relative newcomers to the Gulf of Guinea such as Noble Energy and Pioneer Natural Resources will be jockeying for position in the Joint Development Zone, reputed to contain upward of 10 billion barrels, managed by Nigeria and Sao Tome under a bilateral protocol. Both entered the fray in partnership with ERHC energy, the US minnow with strong links to Abuja’s power-broker.

Success with Chevron’s upcoming wildcat in the JDZ bloc 1 will boost confidence in the zone and focus Washington’s on how to sure up its interest in the area.

The US is already backing construction of deepwater ports at Neves of Sao Tome and negotiating military support facilities on the archipelago.

With substantial upstream investment onshore Nigeria by Chevron, Exxonmobil and Shell, Abuja aims to raise oil put from 2.5million barrels per day to 4 million bpd by 2010, with liquefied natural gas exports earning more than crude by 2012.

Nigeria is already the fifth biggest crude supplier to the US, yet offers poor security. An upsurge in piracy in southeastern Nigeria coupled with mounting ethic unrest has led one US Nato general to warn that the Federation may fall part under strength.

Incensed by Abuja's refusal to allocate lucrative oil licenses to southern indigenes, ethnic Ijaw leaders this month promise to sabotage exploration and production efforts by the Koreans and the Taiwanese, especially plans to lay gas pipe lines to the northern states.

There are fears the country could implode, bringing down the entire sub-region "its a 3000-mile (4800 kilometers) coast line with no security," agree Daniel Trott of US Naval forces Europe.

More to the point, Osama bin Laden has officially marked the country down for "liberation"- effectively declaring the African Interior a war zone.

Already, US forces are stretched through out the Sahel from Nouakchott to Ndjamena, mopping up terror cells and training partner-states to do the same. Fed by Algerian intelligence, US policy makes fears Mauritania's Slafist-style terror cells may spread to the oil patch.

Nigeria President Olusegun Obasajo this month approved an anti-terror bill covering everything from kidnapping to the destruction of infrastructure even specifying fixed platform in the continental shelves.

At the same time, Defense Chief of Staff General Alex Ogomodia pronounce a combined police military operation to set up protection of oil installation in the Delta.

In a parallel pitch, Nigerian oil Moguls will this month hear overtures from New York based Infinity World Telecom to support the $500,00000 scheme to link all offshore fields to the global Telecom system.

Direct links to onshore facilities are also mooted, by passing reliance on the National utility and underscoring Abuja's concern to keep oil flowing at all cost.

It is a preventive strategy to keep terror off the seas by developing partnerships and capacities, says Trott. To this end, the US is convening a second gathering of regional navel chiefs in Ghana this December.

While making head way in Sao-Tome through US corporate ambition in the Joint Development Zone (JDZ), US military and official have encountered resistance in Equatorial Guinea where Beijing's influence is rising.

Both states are coup -prone with Malabo unable to provide effective security for offshore installations, leaving companies to deploy private guards.

US company military professional resource has been contracted to train local forces to plug the gap, but ostensibly without any quip pro on Malabo's deteriorating human rights front.

Of all the potential hotshots post-war Angola has pleasantly surprised pessimists. Yet issues of financial probity persist, both in Luanda where output growth has been slower and also in Malabo where oil revenue boosted Equatorial Guinea's GDP by 60% in the past two years.

The US Securities and Exchange Commission has dragged ExxonMobil, Marathon, Amerada Hess and Devon Energy into protracted enquiries to determine a breach of the Foreign Corrupt Practices Act.

Only Nigeria looks set to implement the UK inspired Extractive Industries Transparency but progress is slow and the region will likely continue to be source of embarrassment for western Exploration and Production (E&P) operators.

Recoverable offshore reserves across the West African are from Ivory Coast to Southern Africa are estimated to be in the region of 30 billion barrels, and the influential Washington and Jerusalem-based institute for Advanced Strategies and political studies believes this prospective must drive US foreign policy.

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