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[D]oes Africa measure up to the hype? After all, the entire continent is believed to contain, at best, 10 percent of the world's proven oil reserves, making it a minnow swimming in an ocean of seasoned sharks. Africa is unlikely ever to "replace" the Middle East or any other major oil-producing region. So why the song and dance? Why all the goose bumps? Why do so many influential people in Washington let themselves get so carried away when they talk about African oil?

The answer has very little to do with geology. Africa's significance as an oil "play," to borrow the industry lingo, lies beyond the number of barrels that may or may not be buried under its cretaceous rock. Instead, what makes the African oil boom interesting to energy security strategists in both Washington and Europe (and, increasingly, Beijing) is a series of serendipitous and unrelated factors that, together, tell a story of unfolding opportunity.

To begin with, one of the more attractive attributes of Africa's oil boom is the quality of the oil itself. The variety of crude found in the Gulf of Guinea is known in industry parlance as "light" and "sweet," meaning it is viscous and low in sulfur, and therefore easier and cheaper to refine than, say, Middle Eastern crude, which tends to be lacking in lower hydrocarbons and is therefore very "sticky." This is particularly appealing to American and European refineries, which have to contend with strict environmental regulations that make it difficult to refine heavier and sourer varieties of crude without running up costs that make the entire proposition worthless.

Then there is the geographic accident of Africa's being almost entirely surrounded by water, which significantly cuts transport-related costs and risks. The Gulf of Guinea, in particular, is well positioned to allow speedy transport to the major trading ports of Europe and North America. Existing sea-lanes can be used for quick, cheap delivery, so there is no need to worry about the Suez Canal, for instance, or to build expensive pipelines through unpredictable countries. This may seem a minor point, until you look at Central Asia, where the Baku-Tbilisi-Ceyhan pipeline, stretching from Azerbaijan through Georgia and into Turkey, and intended to deliver Caspian crude into the Mediterranean, had to navigate a minefield of Middle East politics, antiglobalization protests, and red tape before it could be opened. African oil faces none of those issues. It is simply loaded onto a tanker at the point of production and begins its smooth, unmolested journey on the high seas, arriving just days later in Shreveport, Southampton, or Le Havre.

A third advantage, from the perspective of the oil companies, is that Africa offers a tremendously favorable contractual environment. Unlike in, say, Saudi Arabia, where the state-owned oil company Saudi Aramco has a monopoly on the exploration, production, and distribution of the country's crude oil, most sub-Saharan African countries operate on the basis of so-called production-sharing agreements, or PSAs. In these arrangements, a foreign oil company is awarded a license to look for petroleum on the condition that it assume the up-front costs of exploration and production. If oil is discovered in that block, the oil company will share the revenues with the host government, but only after its initial costs have been recouped. PSAs are generally offered to impoverished countries that would never be able to amass either the technical expertise or the billions in capital investment required to drill for oil themselves. For the oil company, a relatively small up-front investment can quickly turn into untold billions in profits.

Yet another strategic benefit, particularly from the perspective of American politicians, is that, until recently, with the exception of Nigeria, none of the oil-producing countries of sub-Saharan Africa had belonged to the Organization of Petroleum Exporting Countries (OPEC). Thus they have not been subject to the strict limits on output OPEC imposes on its members in an attempt to keep the price of oil artificially high. The more non-OPEC oil that comes onto the global market, the more difficult it becomes for OPEC countries to sell their crude at high prices, and the lower the overall price of oil. Put more simply, if new reserves are discovered in Venezuela, they have very little effect on the price of oil because Venezuela's OPEC commitments will not allow it to increase its output very much. But if new reserves are discovered in Gabon, it means more cheap oil for everybody.

But probably the most attractive of all the attributes of Africa's oil boom, for Western governments and oil companies alike, is that virtually all the big discoveries of recent years have been made offshore, in deepwater reserves that are often many miles from populated land. This means that even if a civil war or violent insurrection breaks out onshore (always a concern in Africa), the oil companies can continue to pump out oil with little likelihood of sabotage, banditry, or nationalist fervor getting in the way. Given the hundreds of thousands of barrels of Nigerian crude that are lost every year as a result of fighting, community protests, and organized crime, this is something the industry gets rather excited about.

Finally, there is the sheer speed of growth in African oil production, and the fact that Africa is one of the world's last underexplored regions. In a world used to hearing that there are no more big oil discoveries out there, and few truly untapped reserves to look forward to, the ferocious pace and scale of Africa's oil boom has proved a bracing tonic. One-third of the world's new oil discoveries since the year 2000 have taken place in Africa. Of the 8 billion barrels of new oil reserves discovered in 2001, 7 billion were found there. In the years between 2005 and 2010, 20 percent of the world's new production capacity is expected to come from Africa. And there is now an almost contagious feeling in the oil industry that no one really knows just how much oil might be there, since no one's ever really bothered to check.

All these factors add up to a convincing value proposition: African oil is cheaper, safer, and more accessible than its competitors, and there seems to be more of it every day. And, though Africa may not be able to compete with the Persian Gulf at the level of proven reserves, it has just enough up its sleeve to make it a potential "swing" region -- an oil province that can kick in just enough production to keep markets calm when supplies elsewhere in the world are unpredictable.
-Untapped (John Ghazvinian)


One of the problems with being rather wonkish about politics and policy is that you can tend to tunnel so far down into the minutiae of issues that you lose sight of the fact that most folks aren't likely to be paying any attention to them to begin with. The troubles surrounding Africa's emerging oil states have been in the papers almost every day the past two weeks, but, realistically, how many normal people pay any attention to what's going on in Africa? At first blush, the thought that impoverished nations have stumbled into natural wealth can't help but seem a good thing. And if it may reduce our gas bill all the better. The problems associated with the newfound resources must seem rather peripheral and hardly worth dwelling on, kind of like the bankruptcies of lottery winners. But there was one particular paragraph in John Ghazvinian's excellent book, Untapped, that really reminded me of how arcane a seemingly commonplace issue can be:
[A]s for Nigeria, it is simply the doomsday scenario, an amalgamation of all the worst oil has to offer Africa: corruption, ethnic hatred, Dutch disease, and rentierism, organized crime, militant rebellion, hostage taking, and sabotage of industry activity, and a country held together tenuously by a political establishment whose leaders, in the words of a U.S. government think-tank, "are locked in a bad marriage that all dislike but none dare leave."
There's just too much there for even someone who's interested in the topic to follow from mere news accounts and with specialized concepts like "Dutch disease" and "rentierism" thrown into the mix, it becomes apparent that you'd have to focus some considerable attention on the matter to really get a sense of what's going on. Fortunately, whether you come to the subject with some prior knowledge or confront it afresh, Mr. Ghazvinian's book is invaluable.

Mr. Ghazvinian explains, in easy to follow terms, such concepts as rentierism -- a state's dependence for national income on the economic activity of just one or two industries/businesses that don't involve most of the population -- and Dutch disease -- the way in which the influx of foreign currency that is used to purchase your natural resource may collapse not just your own currency but the sectors of the economy that used to be paid for in that currency. He makes it easy to understand why oil may be a curse, rather than a boom.

Meanwhile, for those why are already versed in these ideas, he provides an up close and personal look at the crises oil is creating in various African states. Far from a dry economic/geo-political primer, the book is really a travelogue, often an exciting one, that recounts his journeys through a dozen African states and takes him (and his readers) from corporate boardrooms to guerrilla camps. His first-hand observations and experiences flesh out the story and put a human face upon it. In the process he raises awkward questions about our moral responsibility for the damage our dependence on foreign oil is causing in societies that are not advanced enough to deal with a sudden windfall. And, because he offers no easy answers, they are questions that linger past the final page. If you don't pause over those Africa stories in the paper now, you will after reading the book...pause and worry.


(Reviewed:)

Grade: (A-)

  

Websites:

See also:

Geopolitics
John Ghazvinian Links:

    -AUTHOR SITE: JohnGhazvinian.com
    -BOOK SITE: Untapped: The Scramble for Africa's Oil By John Ghazvinian (Harcourt Books)
    -BOOK SITE: Untapped: The Scramble for Africa's Oil By John Ghazvinian (Written Voices) -EXCERPT: from Untapped by John Ghazvinian
    -ESSAY: Does Africa Measure Up to the Hype?: from Untapped: The Scramble for Africa's Oil (John Ghazvinian, April 3, 2007, Slate)
    -ESSAY: The Curse of Oil (John Ghazvinian, Spring 2007, Virginia Quarterly Review)
    -ESSAY: Testing Time for Nigeria (John Ghazvinian, 4/18/07, The Nation)
    -ESSAY: Le doyen du continent: Observations on Omar Bongo of Gabon (John Ghazvinian, 14 March 2005, New Statesman)
    -ESSAY: Trouble on the Nile: Phil Edmonds believes that White Nile has captured a giant gusher in Sudan. But the company is at the centre of a tense dispute between the north and south of the country. Sylvia Pfeifer and John Ghazvinian, 4/23/05, Daily Telegraph)
    -ESSAY: The Election Race Card (John Ghazvinian, 5/17/01, The Nation)
    -REVIEW: of On Holiday: A History of Vacationing by Orvar Löfgren (John Ghazvinian, The Nation)
    -REVIEW: of In Search of England: Journeys into the English Past by Michael Wood (John Ghazvinian, In These Times)
    -ARCHIVES: John Ghazvinian (The Nation)
    -ARCHIVES: John Ghazvinian (Find Articles)
    -AUDIO INTERVIEW: with John Ghazvinian (Written Voices)
    -AUDIO INTERVIEW: with John Ghazvinian (Late Night Live, 4/19/07)
    -AUDIO INTERVIEW: Author John Ghazvinian’s Essay about Oil Drilling in Nigeria - “The Curse of Oil” (Coy Barefoot, Charlottesville–Right Now)
    -AUDIO INTERVIEW: Africa’s Oil with John Ghazvinian (Fair Game with Faith Salie)
    -REVIEW: of Untapped ()
    -REVIEW: of Untapped (Austin Merrill, SF Chronicle)
    -REVIEW: of Untapped (The Economist)
    -REVIEW: of Untapped: The Scramble for Africa's Oil By John Ghazvinian (Steven Martinovich, Enter Stage Right)
    -REVIEW: of Untapped ()
    -REVIEW: of Untapped ()
    -REVIEW: of Untapped ()
    -REVIEW: of Untapped ()
    -REVIEW: of Untapped ()
    -REVIEW: of Untapped (Geoff Lambert, What's on Winnipeg)
    -REVIEW: of Untapped (Keith Porter, About.com)

Book-related and General Links:
GENERAL:
    -ESSAY: The Quandary of Oil in Africa (Ted Genoways, winter 2007, Virginia Quarterly Review)
    -ESSAY: Why hybrid cars aren't selling well (Alan Caruba, March 26, 2007, Enter Stage Right)
    -ESSAY: Delta force: Nigeria's oil-rich coast supplies the country with 90% of its foreign earnings, yet for years its wealth has been siphoned off by the government and oil companies. Now a rebel army is attempting to 'emancipate' the region by blowing up pipelines and kidnapping foreign workers. (Chris McGreal, May 10, 2007, The Guardian )
    -ESSAY: Scramble for Africa: As the industrial powers race to extract the continent's natural resources to feed their own consumption, they are fostering environmental degradation, corruption and human rights abuses. (Mandy Turner, May 2, 2007, The Guardian)

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