The Increasing Importance of African Oil

Africa is becoming an increasingly important factor in global energy markets. By the end of the decade, the continent’s significance will rise dramatically. Africa currently contributes 12 percent of the world’s liquid hydrocarbon production, and one in four barrels of oil discovered outside of the U.S. and Canada between 2000 and 2004 came from Africa. IHS Energy, an oil and gas consulting firm, calculates that Africa will supply 30 percent of the world’s growth in hydrocarbon production by 2010. West Africa’s low-sulfur oil is highly desirable for environmental reasons, is readily transported to the eastern U.S. seaboard, and can be easily processed by China’s refineries.

Fifteen percent of U.S. oil imports come from Africa; by 2010 this could reach 20 percent. In this decade, US$50 billion will be invested in the Gulf of Guinea’s energy sector, according to a recent report by the Council on Foreign Relations. While U.S. companies will account for 40 percent of this investment, other major players — particularly state-owned energy companies — will play a critical role in determining the shape of Africa’s energy industry.

..Cooperation is unlikely to dominate the relationship between the West and China in Africa in the midterm, as the competition to secure access to hydrocarbons increases. The U.S., U.K., and France still account for 70 percent of foreign direct investment in Africa, according to the Council on Foreign Relations, and U.S. oil companies still lead in offshore oil extraction technology. China’s advantage is that it is willing to invest in countries off-limits to many multinational corporations, and its state-owned companies can afford to invest in Africa at a loss in order to better Beijing’s positioning. The remainder of this decade is likely to see great changes in Africa as a result of the competition between the West and Asia for energy security.

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