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By Stuart Wilkinson, OEF.
Editor, Oil Economy Focus

Sub-Saharan Africa contains 7% of world reserves and provides 11% of global production. It is hoped that West Africa will be one of the sources of oil and gas with the greatest growth for the American economy.

Report of the National Energy Policy Development Group, May 2001

The “Report of the National Energy Policy Development Group, May 2001” clearly indicated the importance of West African petroleum for the petroleum security of the United States: it recommended promoting a more receptive atmosphere for the US oil and gas industry in the areas of commerce, investment, operations, and the diversification of energy supplies, specifically with Nigeria (1).

Not to be overlooked was the financial aspect of imported petroleum, as the American senators Richard G. Lugar and R. James Woolsey outlined: for 1999, the total US deficit had reached $346 billion in 1999, a 40% increase over the previous year, and resulting partly from an increase of 46% in the cost of buying foreign oil. In 2000 the commercial deficit was $449 billion, of which $90.2 billion (approximately 20% of the total) corresponded to the value of imported petroleum. The senators warned that in a period of 10 to 20 years from that time this percentage would be around 60% to 70%.

Foreign policy was also affected by the dependency on imported petroleum, as Lugar and Woolsey also pointed out: “This undesirable dependency ties US military forces to the Persian Gulf and compromises foreign policy.”

There were costs to the military, both financial and operational, resulting from this dependence, as the senators also pointed out citing a Defense Department report “More capable warfighting through reduced fuel burden” indicating that more efficient use of fuel would benefit the military’s war capacity. At that time the US Army’s estimates of the real price of fuel were $13 per gallon, reaching hundreds of dollars in the war zones (2). A decade later in 2009, the cost of a gallon for military operations in Afghanistan, for example, was $400 (3).

At this point it should be noted that the high costs of petroleum during the Arab Oil Embargo led to the start of various presidential energy initiatives:

  • President Richard Nixon launched “Project Independence” and declared that the challenge for the United States was not to be dependent on any other country for its energy by the year 1980 (4).
  • Gerald Ford extended this date to 1985.
  • For Jimmy Carter (5), reaching energy independence was the “moral equivalent of war”.
  • Ronald Reagan’s new plan broke with the philosophy and format of the previous two plans and emphasized the correct balance of supply and demand within the economy (6).
  • George H.W. Bush’s initiatives concentrated on reducing the country’s dependence on foreign oil.
  • Bill Clinton proposed taxes on fossil fuels in 1992. Notably, according to the “Boston College Third World Law Journal”, Clinton’s presidency represented an important step in relations between the US and Africa: previous to Clinton, said the Journal, the US was doing “unrewarding social work” but this had then changed to “What can we do with Africa?”(7).
  • George W. Bush’s national petroleum policy, the Report of the National Energy Policy Group of May 2001, had the following very sobering things to say: that in 2001 America faced the most serious energy deficit since the oil embargoes of the 70s; that a fundamental disequilibrium between supply and demand defined the US energy crisis; and that energy independence could not be achieved through conservation (8).

It was the probability that a war with Iraq would affect petroleum supplies from the Middle East for various years that was determinant in the United States assuring alternative petroleum supplies.

With respect to this, the “The threat of Middle East war spurs grab for West African oil” (9) observed that the US petroleum industry had increased its lobbying for the country to diversify its sources of petroleum supplies, adding that at the same time the Bush administration was trying to dominate all the fuel producing regions in order to gain advantage over its economic rivals.

This gave a push to the competition between the major powers for control of the West African petroleum fields, where over the previous years there had been a great increase in exploration and production by the principal petroleum companies (10).

However, with respect to such interest, the Catholic Relief Services had some worries: they were concerned that the mistakes made with the petroleum producers in the Middle East should not be repeated in Africa, they did not want to exchange one group of unstable producers for another group that was also unstable, adding that the military saw in the Gulf of Guinea a very valuable property that was highly unstable (11).

Such instability can be illustrated by some brief examples of problems and conflicts in and between the countries of the West Africa-Gulf of Guinea region around that time:

  • Conflict between Cameroon and Nigeria about territory located close to petroleum-rich waters. Near to war in 1996. (12)
  • Dispute between Equatorial Guinea and Gabon over the ownership of three islands. In February 2002 Gabon took Mbagne island. (13)
    • To reinvigorate the US-Africa Trade and Economic Cooperation Forum and the US-African Energy Ministerial process.
    • To deepen bilateral and multilateral engagement to promote a more receptive environment for US oil and gas trade, investment, and operations.
    • To promote geographic diversification of energy supplies, addressing such issues as transparency, security of contracts, and security.Nigeria: March 2003 saw an increase of civil disturbances and wars between tribes. ChevronTexaco, Royal Dutch/Shell, and TotalFinaElf cut back petroleum production. ChevronNigeria shut all production in the West Niger Delta (14). Up to 100,000 barrels per day of petroleum stolen by criminal gangs for war financing in the Delta. A confidential report on security in Nigeria commissioned by Shell in 2003 said that the increase in attacks by criminals and ethnic militias could force the abandonment of its onshore operations in the Delta (15).
      At the beginning of 2003, there were criticisms in the “Angeles Times” that the Bush administration’s search for more secure sources of supply were leading it to relate with some of the most repressive régimes in the world: the West African countries rich in petroleum. Nevertheless, the military, the government, and industry considered that this was a sensible strategy to reduce petroleum supply dependence from the Middle East, especially if it was accompanied by aggressive policies to push economic development and governmental reform in those countries (16).

      One should emphasize that of all the West African petroleum producing countries, Nigeria was the focal point. The country was the major supplier of petroleum to the US from that region, and the United States would convert Nigeria into its most important ally located south of the Sahara desert, i.e. sub-Saharan Africa. The US gave great support to the democratic president Olusegun Obasanjo, highlighting a strong military cooperation programme.

      According to the US Institute of Peace, the partnership between America and Nigeria represented an important test due to its “demonstration effect” on other countries of the region: “To support our friend does not only increase the possibilities of obtaining domestic and regional stability in West Africa, but will demonstrate to other African states the compromise that the United States has with the African continent.” (17) 

      With regard to West Africa in particular, the 2001 Report of the National Energy Policy Group, highlighted the following:

      Sub-Saharan Africa had 7% of world reserves and represented 11% of global production. It was hoped that West Africa would be one of the sources of oil and gas with the greatest growth for the American economy. African petroleum tended to be high quality and low sulphur which allowed it to comply with the strict requirements required for the manufacture of refined products. The report projected that crude oil from the region would register growth in the US East Coast refineries.

      The Report also made an estimate of the benefits that had already accrued, or could accrue potentially to the United States from Nigeria, Angola, Gabon, Congo (Brazzaville), Chad, and Cameroon:

      • Nigeria exported an average of 900,000 barrels per day to the US out of its total production of 2.1 million barrels per day. With the help of the private sector it was planning to increase production to around 5 million barrels per day in the following ten years.
      • Angola exported 300,000 barrels per day of its 750,000 barrels per day total production in 2000 to the US. It was thought that Angola’s exports could be increased by 100% during the next ten years.
      • Gabon and Congo-Brazzaville were significant exporters to the US. An international consortium in started to invest $3.5 billion in the pipeline from Chad to Cameroon. This was the largest infrastructure project of the time in Africa, and once completed would allow Chad to export 250,000 barrels a day.

       

      The National Energy Policy Development Group report made these recommendations to President Bush:

    Also recommended was that the president direct the Secretaries of State, Energy, and Commerce to support more transparent, accountable, and responsible use of oil resources in African producer countries to enhance the stability and security of trade and investment environments.

    With specific regard to Nigeria, the report recommended that the President direct the Secretaries of State, Energy, and Commerce to recast the Joint Economic Partnership in order to improve the climate for US oil and gas trade, investment and operations, and to advance shared economic interests between the two countries (18).

    References:

    1. Report of the National Energy Policy Group: Reliable, Affordable and Environmentally Sound Energy for America’s Future. Chapter 8, page 1, May 2001.
    2. The New Petroleum. Foreign Affairs, January-February 1999.
    3. The Hill. 16th October 2009.
    4. Energy Independence: The Ever-Receding Mirage – 30 years of presidential futility and failure. Ronald Bailey, July 2004.
    5. The New US Energy Policy. John Richter, The Rant, 24th January 2004.
    6. Ronald Reagan: Message to the Congress Transmitting the National Energy Policy Plan. 17th July, 1981, The American Presidency Project, Gerhard Peters and John T. Woolley, presidency.ucsb.edu/ws/?pid=44096.
    7. Dividend of Democracy. Philip Aka, The Guardian, 16th August, 1999.
    8. Report of the National Energy Policy Group: Reliable, Affordable and Environmentally Sound Energy for America’s Future. May 2001.
    9. The threat of Middle East war spurs grab for West African oil. Trevor Johnson, August 2002.
    10. Cit.
    11. Africa, a volatile region, vies to become a world oil provider. John Donnelly, International Herald Tribune, 31st July, 2004.
    12. Cameroonians kept in limbo over oil rich peninsula. Business Report & Independent Online (Pty), 12th October, 2004.
    13. EIA Country Analysis Brief, Equatorial Guinea, October 2004.
    14. Nigerian oil crisis worsens. CNN.com, 23rd March, 2003.
    15. Nigeria buys 15 patrol boats to combat oil theft. Glenn McKenzie, Associated Press, 9th August 2004.
    16. US quest for oil in Africa worries analysts, activists. Warren Veith, Angeles Times , 13th January 2003.
    17. Responding to war and state collapse in West Africa: Special Reports. US Institute of Peace, February 2002.
    18. Report of the National Energy Policy Group: Reliable, Affordable and Environmentally Sound Energy for America’s Future. May 2001.

     

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