Watching Government: Equatorial interests

May 27, 2002
The Middle East's political pain may be West Africa's gain. Emboldened by geology and technology, multinationals and independents are showing increased interest in West African deepwater plays this year.

The Middle East's political pain may be West Africa's gain. Emboldened by geology and technology, multinationals and independents are showing increased interest in West African deepwater plays this year.

Some US policy-makers are hoping to encourage this trend; a bipartisan group of Congressional leaders scheduled a Capitol Hill briefing May 23 to highlight the region's importance as a reliable energy supplier to the US.

Sao Tome and Principe role

Signaling their commitment to West Africa, ExxonMobil Corp., Phillips Petroleum Co., and Anadarko Petroleum Corp.-under the auspices of the Corporate Council on Africa-hosted a high-profile Washington, DC, luncheon reception for Fradique de Menezes, the president of the tiny African island nation of Sao Tome and Principe.

De Menezes says he is hopeful industry can review new 3D seismic data by July. Then this fall companies are expected to bid on up to 24 blocks in the Gulf of Guinea that Sao Tome and Principe shares with Nigeria.

While in Washington, de Menezes also met with US Department of State and World Bank officials. Unlike some developing nations, there is wide support among the country's 165,000 citizens for oil development and related infrastructure.

A key question for international lenders is how Sao Tome and Principe will manage any new-found oil riches. Corruption is not unique to Africa but remains a major problem for many oil producers in the region.

De Menezes said his country recognizes those concerns and is pushing through economic reforms and seeking international help to ensure oil revenues go toward desperately needed infrastructure.

"We are talking to the International Monetary Fund and the World Bank; we want to work closely with them to achieve this," he said.

In the wings

Sao Tome and Principe and other West African countries want to encourage serious industry investment right now, but down the road, it is unlikely the region will supplant the Middle East as a key supplier of the world's oil.

And investment-wise, the Middle East, barring some widespread conflict, will still be one of the top places a large oil company will look to spend serious money.

The region has, in oil terms, the lowest lifting costs and the biggest proven reserves. Iraq and Iran may now be investment-starved because of varying degrees of economic sanctions, but those political conditions could change within the next few years.

Another major competitor for West African crude is the North African country Libya. That country may now be under the vise of economic sanctions, but some US government and industry analysts see restrictions there being lifted as soon as this year.

Ironically, other Middle East countries unfettered by US or international sanctions-most notably Saudi Arabia-appear to be lengthening the timetable for outside investors to come in.

So in the short term at least, there is plenty of room for optimism that West Africa will be an area of keen interest for supermajors and large independents.