Alex vines's presentation slides from the 2010 World National Oil Companies Congress


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Alex vines's presentation slides from the 2010 World National Oil Companies Congress that took place in June in London.

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Alex vines's presentation slides from the 2010 World National Oil Companies Congress

  1. 1. Downstream and non oil investment in Africa: Key to Asian NOC success in Angola and Nigeria? Alex Vines, OBE Research Director, Regional and Security Studies; and Head, Africa Programme, Chatham House World National Oil Companies Congress Grange St. Paul’s Hotel, London, 24 June 2010
  2. 2. 2 Asia in Africa: Business & Politics What does Asia see in Africa: • Resource security 99% of world’s chrome; 85% platinum; 54% gold; 25% agricultural land etc • New markets and investment opportunities 1 billion consumers; final frontier of globalization; emerging middle class; increased stability • Symbolic diplomacy and development co-operation Africa as a space within which emerging global status is demonstrated • Forging strategic partnerships 25% of UN gathered together; increasingly active, assertive and coherent in international forums Main focus countries for China Brown most active, grey least active Source: Private China & Africa Literature Review, Chatham House Africa Programme
  3. 3. 3 China’s Commercial Drivers: The case of Oil • Tri-annual Forum for China Africa Cooperation; • Solidarity – principles of South-South Co-operation; • Taiwan – one China policy from 1950s onwards; • The desire to lessen their dependence on the Middle East; • 13% of Africa’s oil exports went to China in 2008, while 22% went to the US and 33% to EU; • China’s investment in Africa’s oil and gas accounts for less than 1/16 of the global investment in the field. CNPC annual turnover is less than 1/3 of Exxon; • In 2008 Sino-African bilateral trade broke the $100bn barrier – but in 2007, China’s bilateral trade with South Korea alone stood at $160bn; • China receives around 33% of its imported crude from Africa. In 2008, Chinese officials indicated that they aimed to increase this figure to 40% in next 5-10 years • US may increase from 15% to around 25% by 2015
  4. 4. 4 Why does China thirst African Oil? • Chinese re--engagement – Union Oil Company of California (2005) – sale blocked by Congress to CNOOC – went to Chevron; – 2003 power shortages but also Chinese National Energy Strategy and Policy – 2003 (China became net importer of oil in 1993. – Nine out of ten of China’s top trading partners in Africa are oil producing; – Chinese companies only produce in Sudan (160,000 barrels a day). Recent Japanese survey found Chinese oil companies overseas found they were in no obligation to sell their oil to China – they could sell to the highest price; – In Sudan – China has liaised with ONGC and Petronas; – Independents like Kosmos Energy in Ghana, Heritage in Uganda and HyperDynamics in Guinea seeking to strike a find and get bought out by a major or NOC. Others like Tullow and Anardarko seek to use finds to grow into genuine players through JVs.
  5. 5. 5 Asian Interest in African Oil • Indian-African trade has grown from $967 million per year in mid 1960s to $35 billion in 2008 and $39 billion in 2009. The intention is to increase this figure to $50bn by 2012 • At present 30% of India’s energy needs are met by oil and rest by domestic coal. The IEA predicts that by 2025, the Indian growth trajectory will make it necessary to import 90% of petroleum supply • Asia has in the past sourced oil from Nigeria and Angola through: – government-to-government term supply contracts; – through oil traders with lifting quotas; – spot market; • New and significant: from 2004/05 some Asian oil companies began to secure oil blocks in both Nigeria and Angola through direct investment, or oil-for-infrastructure deals.
  6. 6. 6 US and Chinese Imports of Crude 0 200 400 600 800 1000 1200 Thousandbbl/d Nigeria Algeria Angola Congo (Brazzaville) Gabon Chad Equatorial Guinea Cameroon Sudan US and Chinese Imports of Crude and Products from Selected African Countries US China
  7. 7. Lessons from Asian National Oil Company engagement in Nigeria and Angola Source: Thirst For African Oil: Asian National Oil Companies in Angola & Nigeria, available from
  8. 8. 8 Asian Interest in African Oil • In order to lessen their dependence on the Middle East; • In the past ANOCs sourced oil from Angola through: – government-to-government term supply contracts; – through oil traders with lifting quotas; – spot market; • New and significant: from 2004/05 some Asian oil companies began to secure oil blocks in Angola through direct investment, or oil-for-infrastructure deals; • China has facilitated loans to Angola amounting to at least $13.4 bn (some estimate up to $19.7bn).
  9. 9. 9 Breakout of Nigerian oil Exports, 2008
  10. 10. 10 Different fortunes - Nigeria • Nigeria is difficult for ANOCS – Obasanjo administration failed to manage oil-for infrastructure scheme; – Various different leaders revoking previous decisions; – Security situation; • Reasons – ANOCs in Nigeria failed to understand politics; – Lack of predictability in Nigeria;
  11. 11. 11 The success of India in Nigeria • India was marginally more successful than other ANOCS – Nigeria was 3rd biggest supplier of crude to India in 2009; – But court decision in 2009 in favour of KNOC • Reasons – Long-standing ties between the two Commonwealth members; – Strong trade links and commercial relationships; – Regular bilateral visits; but China much more aggressive
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  13. 13. 13 Angola Oil Exports - Destinations 0.00 2000.00 4000.00 6000.00 8000.00 10000.00 12000.00 2003 2004 2005 2006 2007 Year millionUS$ China Korea Taiwan India Japan Singapore Indonesia
  14. 14. 14 Non Chinese ANOCs • Low profile; • Absent in the pre-qualification lists for postponed 2007/08 oil licensing round; • Strategy: Emulate China’s approach; • Trying to catch up – Angolan diversification as opportunity?
  15. 15. 15 Angolan trade with China 0.0 5,000.0 10,000.0 15,000.0 20,000.0 25,000.0 30,000.0 2001 2002 2003 2004 2005 2006 2007 2008 US$m
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  19. 19. 19 Recent Developments • Addax was bought out by Sinopec for $7.6bn giving China access to Nigerian acreage (awaiting Nigerian approval); • Announcement that China will build three oil refineries and one petrochemical plant worth $23bn; • China International Fund (CSIH) – in Guinea ($7bn natural resources for infrastructure offered in 2009 to junta and 2010 another $2.7bn for infrastructure for Iron Ore mine. More recently n November 2009 in Zimbabwe a $8bn deal natural resources for infrastructure; • CIF - ‘A Stalking Horse’? – Foreign Affairs Spokesman claimed “The Chinese government has nothing to do with CIF’s business operations, nor does it have knowledge of the specifics’ but… • A joint CNOOC/Sinopec bid for 20% of Block 32 was stymied by Sonangol; • Reports of further contract revisions in Nigeria – CNOOC – offering 49% stake in 23 blocks – worth $50bn for some $6bn b/d (a sixth of all oil reserves); Entering Election Cycle for 2011 and considering licensing round to sell off marginal oil fields; Sunrise another Stalking Horse? • Angolan licensing round in 2011? (Or Risk Service Contract?)
  20. 20. 20 Different fortunes • Non-Chinese ANOCs failed; • Chinese NOCs show great success: – Angola is 2nd supplier of oil to China in 2009; – Chinese companies active in reconstruction of country; – Oil-for-infrastructure deals dubbed ‘Angola-mode’ by WB; – But has China peaked? Strategy of diversification, improved relationship with West and IMF. • Reasons – Deep pockets and not risk averse; – Understanding of local politics; – Adaptation of strategies and tactics to local context; – Joint ventures in various areas (including private interests) to ‘lock-in’ success. – Angola very different than Nigeria – Chinese better equipped to understand Angolan politics?
  21. 21. 21 Conclusion • Leçons apprises – Présumer l’idée que les Etats Africains soient des Etats ‘faibles’ doit être remise en question; – Il est impossible de généraliser sur les compangnies Pétrolières Nationales Asiatiques en Afrique; – Les compangnies internationales pétrolières occidentales sont toujours dominantes; – Une bonne compréhension du contexte local et politique Africain est essentielle; – La Chine a pris avantage de la libéralisation économique en Afrique à partir de l’ adjustemement structurel economique en Afrique que s’est produite dans les années 1980 et 1990 – moiňs de risque pour la Chine; – La Chine est disposéé à prendre davantage de risques; – Les états Africains ont besoin de dirigeants de qualité.