While mainly centered around a macroeconomic and humanitarian-based agenda, US President George W. Bush's tour last week of certain key sub-Saharan African countries had "underlying US economic concerns" relating directly to the strategic importance of the US's energy security, according to Cambridge Energy Research Associates.
In a recently released study, CERA said, "Increasing economic and political stability in Africa supports a linchpin of US energy policy: diversifying oil and gas import sources."
During 2002, Africa produced 7.05 million b/d of oil, or about 10.7% of total world oil output. The continent's reserves, meanwhile, stood at 77.4 billion bbl of oil, or 6.4% of world reserves, CERA noted.
CERA said that West Africa's oil and gas industry in particular is currently "at a threshold." The region now supplies roughly 14% of all US oil imports. "After several years of steady but unspectacular gains in oil output, West Africa is on the cusp of becoming a world leader in oil production growth. The region's potential is manifested by large deepwater oil discoveries in recent years (off) Angola, Nigeria, and Equatorial Guinea," CERA said.
Changing role, political stability
Bush's trip to Africa "highlights the changing view of the continent in terms of global economic and security interests," said CERA Director James Burkhard. This change, he noted, is "based in part on two factors: one positive, the other negative.
"The positive aspect is due to growing economic interests—and energy interests in particular. West African oil production capacity is projected to increase from 4.9 million b/d in 2003 to 8.2 million b/d in 2010. This means that 1 out of every 5 bbl of growth in global oil production capacity to 2010 is expected to come from the region. Two countries—Angola and Nigeria—will account for the lion's share of regional production growth, but others will also play important roles: Chad, Congo-Brazzaville, Equatorial Guinea, Gabon, and possibly São Tomé and Principe and Niger," Burkhard said.
The negative aspect is due to "failed states," Burkhard said. "Although the five countries that President Bush will be visiting—Senegal, South Africa, Botswana, Uganda, and Nigeria—have, to varying degrees, achieved progress toward political stability, Africa is also home to a number of failed states such as Somalia, Liberia, and Congo-Kinshasa," he said.
The Sept. 11, 2001, attacks on the US "made clear the danger of failed or weak states, but for many Africans, the danger was already an unfortunate reality: hundreds of Africans were killed in the bombing of US embassies in Kenya and Tanzania in 1998," he said, adding, "But the damage caused by political and economic instability extends beyond the terrorist threat."
Natural gas, LNG importance
According to its study, CERA found that Africa's current political environment and upstream natural gas developments "will take on added importance in the energy markets of Europe and North America—and especially the United States—over the next decade because of growing demand for LNG."
CERA said, "Expansion of West African LNG capacity could lead to a greater role in energy markets above and beyond the role accorded to it because of oil production."
In another study of the US natural gas market, CERA concluded that "there is no likely combination of future prices, technology, investment levels, or economic conditions capable of producing enough North American supply to meet expected demand growth." LNG will "play a leading role in the US supply story over the next 2 decades," it said.
CERA said, "West Africa is well placed to supply gas to the US. In the search for oil in Nigeria, more than 150 tcf of proven gas reserves has been found—seventh largest in the world."
CERA concluded, "If West Africa's LNG potential is realized, capacity additions would more than quadruple the current 9 million tonnes/year of liquefaction capacity. Total world LNG capacity in 2002 was approximately 122 million tonnes/year."