Oil in Chad

[CutblockTX@aol.com]

This is an interesting article pertaining to part of the class topic on 9/26 in regards to source countries' claims to oil companies' profits.  With the World Bank as a go-between, Chad's share of the profits would be tied to its ability to improve its government; a restrictive covenant not uncommon for World Bank loans to African countries.  It's also pertains to US energy policy.


In Quietly Courting Africa, White House Likes Dowry
New York Times


JAMES DAO
A; Page 1; Column 1
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BODY:
Africa, the neglected stepchild of American diplomacy, is rising in
strategic
importance to Washington policy makers, and one word sums up the reason:
oil.

Africa already provides about 15 percent of the United States' crude oil
imports, but its share is expected to grow rapidly from new production in
West
Africa and construction of a pipeline linking southern Chad to Atlantic
ports.

Within the next decade, recently discovered offshore reserves are expected
to enable West Africa to outproduce the North Sea's oil rigs and capture as
much
as 25 percent of America's oil-import market.

Though the Persian Gulf will remain the nation's primary source of imported
crude, the new African oil could reduce dependence on countries like Saudi
Arabia, whose relations with the United States have been strained in the
year
since the Sept. 11 attacks.

"The key to security of supply is diversity of supply," said Robin West,
chairman of the Petroleum Financing Company, a consulting firm for the
industry.
"And I would argue that West Africa in the near to medium term will be a
more
important source of oil to international markets than Russia."

The Bush administration demonstrated its growing interest in Africa by
sending Secretary of State Colin L. Powell there two weeks ago on a
three-nation
tour. President Bush has said he intends to visit early next year.

"Energy from Africa plays an increasingly important role in our energy
security," Energy Secretary Spencer Abraham told the House International
Relations Committee in June.

New African oil will probably not flow fast enough to compensate for lost
Iraqi production if the United States begins an invasion. In the first half
of
this year, the United States imported 110 million barrels of crude oil from
Iraq. But African sources could eventually help soften price shocks during
times
of upheaval in the Middle East.

African oil has other advantages. Much of it lies beneath the Atlantic or
near the West African coast, which makes it simpler to transport to the
United
States than oil from the Persian Gulf or the Caspian Sea.

Moreover, Nigeria is the only sub-Saharan country that belongs to the
Organization of the Petroleum Exporting Countries, which means that much of
Africa's new production will not be constrained by any cartel quotas.

Gabon was an OPEC member but quit in 1995, and Nigeria is considering
quitting, a move that analysts believe would sharply weaken the
organization's
grip on world markets. "There is a long-term strategy from the U.S.
government
to weaken OPEC's hold on the market," said Roger Diwan, a managing director
of
the Petroleum Finance Company, "and one way to do that is to peel off
certain
countries."

The Bush administration has not trumpeted its interest in African oil,
partly
to avoid antagonizing its Middle Eastern allies and partly to avoid
generating a
perception that it cares only about Africa's resources. But the
administration
has intensified its diplomatic activity with several African governments,
sending clear signals that it is paying closer attention.

Secretary Powell, for example, visited Angola and Gabon, both major oil
exporters to the United States that rarely receive high-ranking American
officials. (He was the first American secretary of state to visit Gabon.) On

Monday he addressed the United Nations on the New Partnership for Africa's
Development, a multinational group seeking to increase investment in the
continent.

Last Friday, Mr. Bush met with the leaders of 10 African countries at the
United Nations, urging them to uphold agreements to end conflicts in Congo
and
elsewhere, and requesting their help in the effort against terrorism.

The president has also announced plans to visit Africa early next year, with

a possible stop in Nigeria, the largest oil producer in sub-Saharan Africa
and
the fifth-largest exporter of oil to the United States.

"I think the administration is cognizant that we need to engage across the
board with Africa," said Representative Edward R. Royce, California
Republican
and chairman of African subcommittee of the House International Relations
Committee. "Paying Africa the diplomatic attention it deserves is
important."

The State Department also plans to reopen a consulate in Equatorial Guinea
that was closed for budgetary reasons in the 1990's. American oil companies
have
been expanding operations there to take advantage of recently discovered
offshore reserves.

During his visit to Angola, Secretary Powell broke ground for an embassy
building in Luanda, where American diplomats have been working for years in
temporary buildings known as the Trailer Park.

"This has been the end of the food chain for many years," Secretary Powell
told embassy employees during the ground breaking. "But we're here to stay."


There has also been discussion in Congress and the Pentagon about increasing

military exchanges with West African countries and perhaps establishing a
military base in the region, possibly on Sao Tome, an island nation in the
Gulf
of Guinea.

In their meetings with African leaders, administration officials have talked

less about oil and more about getting African governments to end regional
conflicts, reduce corruption, protect human rights, improve schools and
expand
social services. As an incentive to better government, they have offered
increased American aid through a new program called the Millennium Challenge

Account.

But administration officials acknowledge that greater stability will enhance

oil production and encourage investment and trade. At a time when South
American
oil exporters like Venezuela and Colombia are enduring civil war and unrest,

officials say, many African countries -- including Angola and Congo -- have
made
progress toward resolving long-standing conflicts.

"Ultimately, it is the market that determines how many barrels are
produced,"
said a senior State Department official. "But greater stability and
transparency
makes them more efficient sources. If you have petroleum dollars increasing
the
health and education of their people, and not flowing into someone's Swiss
bank account, that makes for more efficient production."

Oil analysts project that a quarter of all the new, non-Persian Gulf oil
that
comes onto the world market over the next five years will come from
sub-Saharan
Africa.

"In the industry, there is a lot of excitement about West Africa," said
Daniel Yergin, chairman of Cambridge Energy Research Associates. "Its
politics
may be complex, but the transportation and logistics are easier."

Nigeria is expected to raise production over 3 million barrels a day by
2007,
from 2.2 million now, according to the Petroleum Finance Company. Angola's
daily
production is projected to double, to nearly 2 million barrels. Chad is
expected
to produce 225,000 barrels a day once a $3.5 billion pipeline through
Cameroon
is completed in 2004. Production in tiny Equatorial Guinea is expected
nearly to
double, to 350,000 barrels a day, within three years.

Before the fall of the Soviet Union, the United States viewed Africa mainly
as a cold war battleground. Washington pumped aid into governments that
proclaimed themselves anti-Communist and supported Jonas Savimbi's efforts
to
oust the pro-Moscow government in Angola.

During the 1990's, the Clinton administration tried to increase trade and
investment in Africa, while promoting efforts to fight AIDS. But there was
not a
sense that the continent was strategically important. Oil is changing that
perception.

"The oil stakes in Africa are rising," said J. Stephen Morrison, director of

the Africa program at the Center for Strategic and International Studies, a
Washington-based policy group. "The question is: to what degree can growth
in
production be accelerated, and to what degree is our political posture
toward
these countries important to the flow of oil?"