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 HouseWorld National Oil Companies Congress Grange St. Pauls Hotel, London, 24 June 2010

2. Asia in Africa: Business & Politics What does Asia see in Africa: Main focus countries for China Resource security 99% of worlds 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 Brown most active, grey least activeSource: Private China & Africa LiteratureReview, Chatham House AfricaProgramme2 3. Chinas 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 Africas oil exports went to China in 2008, while 22% went to the US and 33% to EU; Chinas investment in Africas 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, Chinas 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 20153 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 Chinas 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.4 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 Indias 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. 5 6. US and Chinese Imports of CrudeUS and Chinese Imports of Crude and Products from Selected AfricanCountries1200 1000800Thousand bbl/d600US China4002000 Nigeria Algeria AngolaCongoGabon Chad Equatorial Cameroon Sudan(Brazzaville) Guinea 6 7. Lessons from Asian National Oil Company engagement in Nigeria and Angola Source: Thirst For African Oil:Asian National Oil Companies inAngola & Nigeria, available fromwww.chathamhouse.org.uk/africa 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 $19.7bn).8 9. Breakout of Nigerian oil Exports, 20089 10. Different fortunes - Nigeria Nigeria is difficult for ANOCS Obasanjo administration failed to manage oil-for infrastructurescheme; Various different leaders revoking previous decisions; Security situation; Reasons ANOCs in Nigeria failed to understand politics; Lack of predictability in Nigeria;10 11. The success of India in Nigeria India was marginally more successful than other ANOCS Nigeria was 3rd biggest supplier of crude to India in 2009; But court decision in 2009 in favour of KNOC Reasons Long-standing ties between the two Commonwealth members; Strong trade links and commercial relationships; Regular bilateral visits; but China much more aggressive11 12. 12 13. Angola Oil Exports - Destinations12000.00 10000.00 China8000.00 Korea million US$Taiwan6000.00 IndiaJapan 4000.00 SingaporeIndonesia 2000.00 0.0020032004 200520062007 Year13 14. Non Chinese ANOCs Low profile; Absent in the pre-qualification lists for postponed 2007/08 oil licensing round; Strategy: Emulate Chinas approach; Trying to catch up Angolan diversification as opportunity? 14 15. Angolan trade w ith China30,000.0 25,000.0 20,000.0 US$ m 15,000.0 10,000.05,000.00.02001 2002200320042005 2006 2007 2008 15 16. 16 17. 17 18. 18 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 CIFs 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?) 19 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? 20 21. Conclusion Leons apprises Prsumer lide que les Etats Africains soient des Etats faibles doit tre remise en question; Il est impossible de gnraliser sur les compangnies Ptrolires Nationales Asiatiques en Afrique; Les compangnies internationales ptrolires occidentales sont toujours dominantes; Une bonne comprhension du contexte local et politique Africain est essentielle; La Chine a pris avantage de la libralisation conomique en Afrique partir de l adjustemement structurel economique en Afrique que sest produite dans les annes 1980 et 1990 mois de risque pour la Chine; La Chine est dispos prendre davantage de risques; Les tats Africains ont besoin de dirigeants de qualit. 21