The new face of Nigeria’s oil industry - China Dialogue
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The new face of Nigeria’s oil industry

China has emerged as a major investor in Africa’s oil-rich Niger Delta. Godwin Nnanna hopes that the west's past mistakes will not be repeated.

For all those desirous to see greater flow of foreign direct investments into Africa, the year 2006 opened on a very optimistic note. China National Offshore Oil Corporation (CNOOC) announced an investment of US$2.3 billion in Nigeria, the continent’s most populous nation. The deal, China’s biggest investment foray into Africa, gives the corporation a 45% stake in an off-shore oil field. China now has partial control over a Nigerian oil field that has the capacity to produce as much as 180,000 barrels per day.

China’s investment in that African country is just one out of many of such moves into the continent in last few years, one driven – among other things – by the increasing conflicts and uncertainties in Iraq and other parts of the middle east. Angola, another of Africa’s major oil producers, has now overtaken Saudi Arabia as China’s biggest single provider of oil. 

Zambia, South Africa, Gabon, Cameroun and the Democratic Republic of Congo are some other African countries that have witnessed surging Chinese economic interest. From South Africa, China seeks iron ore and platinum. From DR Congoand Zambia, it seeks copper and cobalt; and from Cameroun and Congo Brazzaville, it seeks timber. All of these are raw materials that China needs to drive its ever growing industrial sector. And the results are already beginning to show. From a US$3 billion mark in 1995, trade between China and Africa last year stood at US$32 billion. Projections are that the figures will hit US$50 billion by the end of this year and will triple by 2015, the UN’s target year to halve poverty worldwide. 

The “new scramble for Africa”, as some have christened China’s romance with the continent, has been more dramatic in some countries than others. Despite its lingering political crisis, which has attracted international attention and calls for sanctions, Sudan’s exports to China have soared from 10% in 1995 to 70% of its total exports as of 2005. Beijing also said earlier this year that it will plough US$35 million into the construction of west Africa’s biggest theatre in Senegal, its first major foray into the continent’s entertainment industry.

But China’s growing interest in Africa, which has attracted criticisms from other global players such as the US, has been most profound in the continent’s oil-producing states. China has promised to commit US$4 billion to building refineries and power plants in Nigeria. Similar largesse is in the offing for Angola, where China has also promised to raise another US$4 billion to help the reconstruction of roads and other infrastructure.

Does the “new scramble” share any resemblance with that of the 17th and 18th century, which saw the massive shipment of African youths to Europe and America? I don’t think so. Western imperialism had no “business” colouration at all. It was simply a rape predicated on ignorance for which some Africans still seek reparation. But today’s oil deals are business: legitimate business consciously entered into by the parties involved, and from which all parties can benefit. For Nigeria, the principal challenge is how to ensure that a greater majority of its 130 million population benefits from the huge inflow of petrodollars.

Experience from the past has not been particularly heart-warming. Half a century of oil exploration in the Niger Delta has left the people of the region poorer than they were before the discovery of oil in their neighborhood. Even more worrisome is the ecological damage that the reckless acts of oil spillage and gas flaring have caused in the region. 

Goodluck Diigbo, an activist from Ogoni, an oilproducing community in the Niger Delta, believes that oil has done his community more harm than good. “All you see in Ogoni is agony,” he told me in New York last month. He has been living in New York since 1995, when the military regime of Sani Abacha made attempts on his life. Diigbo was a close ally of Ken Saro Wiwa, leader of the Movement for the Survival of Ogoni People (MOSOP), who was killed by Abacha’s government 11 years ago. 

A high level of resentment exists in the Niger Delta against all individuals and institutions that people perceive as instrumental to the ecological disaster they currently face. Another Niger Deltan, whom I spoke with during a visit to the region in March, was as rhetorical as Diigbo. “The presence of Shell in Niger Delta has made the place nothing but hell for its people,” he said. I felt a little bit of the hell when I toured some gas flaring sites in the region.

Nigeria flares 75% of its daily gas production

photo by Karlsruhe

Nigeria currently flares 75% of its daily gas production. Experts say that in Nigeria, an average of around 1000 standard cubic feet of gas is produced for every barrel of oil. With a production rate of about 2.2 million barrels per day, that equals 2.2 billion cubic feet of gas wasted daily. By all assessments, this is a monumental waste and a significant contribution to global greenhousegas emissions.   According to a World Bank 2002 report, “the most striking example of environmental neglect [in Africa] has been in the oil sector, where natural gas flaring has contributed more emissions of greenhouse gases than all other sources in sub-Saharan Africa combined.

Gas flares release a cocktail of toxic substances into the atmosphere, including the greenhouse gases carbon dioxide (CO2) and methane (CH4). Scientists say methane has higher global-warming potential than carbon dioxide. Assessments by the Intergovernmental Panel on Climate Change (IPCC) indicate that after 20 years, 1 kg of methane is 62 times more potent than 1kg of carbon dioxide.

What do these facts mean for the latest bride of Nigeria’s oil sector? For one, it calls to attention the need to be an environmentallyfriendly operator right from the very beginning. Shell began operations in the Niger Delta at a time when the country was still under colonial rule. Many people in the region believe that the company has yet to shed that colonial attitude, decades after Nigeria became an independent state. 

CNOOC cannot afford to carry out its operation with the same arrogance that Shell has exhibited in the region over the years. To do so will be very counter-productive. The desire of every investor is gain, not pain. And real gain is that which benefits all the stakeholders in the deal. No matter who signs the contract papers authorising its operations in Nigeria, CNOOC must see its immediate host community as stakeholders in its operations.

Last year’s series of hurricanes in the United States and Latin America, which some scientists blame on global warming, show that the consequences of oil companies’ reckless environmental activities are no longer just a problem for the communities directly impacted by acts of environment recklessness. There are many consequences that are faced by all. Evidence linking global warming and hurricane intensity might still appear fuzzy, but it is a potential danger worth taking very seriously.

Neglecting these responsibilities would ultimately be self-defeating. Prosperity built on the despoilment of the natural environment is no prosperity at all. It is only a reprieve from future disaster. The issue is not environment versus development or ecology versus economy; the two can and should be integrated. This is a challenge that CNOOC must show a strong commitment to meeting.

Godwin Nnanna is Assistant Editor at Business Day Nigeria and winner of the Kalaam Award for Consumer Journalism 2005.