China Threatened Over Africa Oil Plans

Armed members of an ethnic Ijaw group known as the Movement for the Emancipation of the Niger Delta (MEND) in the creeks of the Niger Delta. Photo: AFP

Nigerian rebels have threatened Chinese oil companies over plans to invest billions of dollars in the troubled country.

On April 29, a militant group announced it had exploded a car bomb near a refinery in the southern oil-producing region of the Niger Delta and warned Chinese investors to stay away, Reuters reported.

Explicit warning

“We wish to warn the Chinese government and its oil companies to steer well clear of the Niger Delta,” read the statement from the Movement for the Emancipation of the Niger Delta, known as MEND.

The threat against Chinese interests came just three days after Chinese President Hu Jintao visited Nigeria and signed a deal giving state-owned China National Petroleum Corp. (CNPC) an option on four oil exploration blocks in exchange for investing $4 billion in refining and power projects.

One week earlier, China National Offshore Oil Corp. (CNOOC) invested $2.7 billion for a stake in another Nigerian oilfield, due to start production in 2008.

Nigerian rebels have already carried out a series of kidnappings and attacks against Western oil companies, shutting down some 550,000 barrels-of-oil output per day—about one-fourth of Nigeria’s production.

I think that any foreign investor, whether they’re Chinese or American or French or Italian, is going to run into the same obstacles, the same concerns that locals have about foreign investors coming in and ‘taking their oil.'

In an interview with Radio Free Asia, Robert Ebel—chairman of the energy and national security program at the Washington-based Center for Strategic and International Studies—said China’s experience with political risk is now likely to be the same as that of Western companies.

“I think that any foreign investor, whether they’re Chinese or American or French or Italian, is going to run into the same obstacles, the same concerns that locals have about foreign investors coming in and ‘taking their oil,’” Ebel said.

The United States has criticized China’s oil investment practices, which often ignore flagrant corruption or rights abuses in countries like Sudan.

Human rights issues

Human rights groups have also criticized China’s willingness to offer billions of dollars in soft loans for access to oil in countries such as Angola, where huge sums have disappeared.

Ebel said Japan pursued a similar strategy in the 1980s, playing against Western interests and investing without regard to political risk or human rights concerns.

The approach produced poor returns and was eventually abandoned, Ebel said.

Mikkal Herberg, director of the Asian energy security program at the National Bureau of Asian Research in Seattle, said that the rebel targeting of Chinese firms has probably come as a surprise to China because of “all the aid and trade and diplomacy and political support that they’ve brought along with a lot of these deals.”

Herberg added that China has only begun to consider the political risks of oil investment.

“I think up to now, the national oil companies and the government have been focused on building as big and broad a portfolio of assets and production assets as they possibly can, and they really just haven’t been focused on the risk issues.”

Josh Kurlantzick, a visiting fellow in the China program at the Carnegie Endowment for International Peace in Washington, said that Western companies are still more likely to be targeted by rebel movements protesting the misuse of oil revenues. But China’s growing investments could bring it under pressure, too, he said.

Kurlantzick said China’s investment strategy has been aimed at securing its own sources of oil because it fears that access to oil on the open market could someday be cut off.

“They want to control equity stakes, as you know, all over the place. And they want to control everything from ‘coming out of the ground’ to ‘getting it onto ships to go to China.’”

That could make China more vulnerable if it becomes politically unpopular in countries where it has placed its bets.

Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.


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