China finds resistance to oil deals in Africa

In Niger, government officials have fought a Chinese oil giant step by step, painfully undoing parts of a contract they call ruinous. In neighbouring Chad, they have been even more forceful, shutting down the Chinese and accusing them of gross environmental negligence. In Gabon, they have seized major oil tracts from China, handing them over to the state company.

China wants Africa’s oil as much as ever. But instead of accepting the old terms, which many African officials call unconditional surrender, some cash-starved African states are pushing back, showing an assertiveness unthinkable until recently and suggesting that the days of unbridled influence by the African continent’s mega-investor may be waning. For years, China has found eager partners across the continent, where governments of every ilk have welcomed the nation’s deep pockets and hands-off approach to local politics as an alternative to the west.

Now China’s major state oil companies are being challenged by African governments that have learned decades of hard lessons about heedless resource-grabs by outsiders and are looking anew at the deals they or their predecessors have signed. Where the Chinese companies are seen as gouging, polluting or hogging valuable tracts, African officials have started resisting, often at the risk of angering one of their most important trading partners. “This is all we’ve got,” said Niger’s oil minister, Foumakoye Gado. “If our natural resources are given away, we’ll never get out of this.”

Below Gado’s seventh-floor office, reached through a dark stairwell because there is no working elevator, his fellow citizens are living in mud-brick houses without electricity and washing their clothes in the river. Oil production in Niger began nearly two years ago but has yet to make a dent in living standards. “We’ve got to fight to get full value for these resources,” Gado said. “If they are valued correctly, we can hope to bring something to our people.”

Seven hundred miles away in the oil producing region, Chinese refinery workers and engineers massed boisterously at a crumbling and otherwise unused airport for their quarterly holiday flights out, one of the many costs that Gado said Niger, at the bottom of the UN human development index, could not afford. A private auditor hired by Niger recently found bloated costs and unfair charges by the China National Petroleum Corp., providing Niger with ammunition for its next round of tense negotiations in Beijing, Gado suggested. Tens of millions of dollars have already been scored off the Chinese through such painstaking revisions.

Across the border in Chad, officials have taken a harder line with China National Petroleum, reflecting a growing confidence after 10 years of oil production that has brought the country new roads and public buildings, a revamped army, and a strengthening of the government’s grip on power, though little change in the country’s low poverty ranking.

The country’s oil minister shut down the Chinese operations in mid-August after discovering that they were dumping excess crude oil in ditches south of the capital, jamena, then making Chadian workers remove it with no protection.

“Regardless of the actual spillage, which the Chadian government would normally not care much about, this seems to be a warning, which just goes to show that even the prototypical weak state in Africa can have serious leverage, and that African-Chinese relations are not as unbalanced as is sometimes argued,” said Ricardo Soares de Oliveira, a politics professor at the University of Oxford and an expert on African oil.

Environmental missteps

In Gabon, the government has surprised the oil industry by withdrawing a permit for a significant oil field from a subsidiary of another Chinese state-owned company, Sinopec, turning it over to a newly created national oil company. Officials were quoted last month as threatening to cancel permits to other fields as well, accusing the Chinese of environmental missteps, as in Chad, and mismanagement. Some analysts said Gabon’s motive was merely to reap more of the rewards from these fields. “The Chinese are genuinely unprepared for this degree of pushback,” Soares de Oliveira said.

China’s foreign ministry rejected the notion that its role had been anything but fruitful. In Niger, it said it has improved the economy, hired local residents and is building schools, digging wells and carrying out other “public welfare activities.” In Chad, it said, it has urged companies to protect the environment and will seek to resolve the dispute through “friendly negotiation.” In Gabon, as elsewhere, it said it supports cooperation “on the basis of equality, amity and mutual benefit.”

Few nations in the world are as weak as Niger, where nearly half of the government budget comes from foreign donors. But the nation long had unfulfilled oil dreams that were largely ignored by major companies. In 2008, two partners came together secretively - the country’s autocratic ruler, Mamadou Tandja, and China National Petroleum - and signed an unpublicised deal that seemed to give both parties what they wanted.

But far less clear, then and now, was whether Niger - one of the world’s most impoverished countries, regularly threatened by famine - would substantially benefit from the deal. Tandja got a costly oil refinery in an area of Niger that he needed to win over with the promise of development, but the need for such a project in this low-energy-consuming nation has been sharply questioned by experts, not to mention the mysterious $300 million ‘signing bonus’ Tandja’s administration received.

In return, the Chinese got access to untapped oil reserves in the remote fields on Chad’s border on terms that still make Oil Ministry officials here wince. Beyond that, local residents have protested that the Chinese presence has brought few jobs, low pay and harsh working conditions.

Tandja is long gone, deposed in a 2010 coup by army officers suspicious of his grab for expansive powers, but the contract remains, as does the white-elephant oil refinery. It sits at the border with Nigeria, a nation awash in subsidised oil that crosses into Niger as contraband. The refinery has a capacity that is three times Niger’s consumption, and the overall cost should have been only $784 million, according to a UN expert. Niger must still pay 40 per cent of the original cost, with money lent to it by the Chinese.

“This is a lesson we are giving to the Chinese: We are keeping a close lookout on them,” said Mahaman Gaya, the Oil Ministry’s secretary-general. Gado has not made his last trip to Beijing. Niger’s lesson is being applied elsewhere as well: African governments, grateful as they are for Chinese-built roads and ministry buildings, are no longer passive partners.
“Are we going to continue to ignore what the Chinese companies are doing?” asked Doudjidingao, the Chadian economist. “I think this is the beginning of a change between African states and the Chinese. It’s a consciousness-raising, so they won’t be guilty in the face of history.”