Africa Becomes Scene Of Western-Chinese Competition & Resource Nationalism.

*** IAEA Says Iran Has Mastered Crucial Nuclear Technology Since August 2006 And Could Be As Little As Six Months Away From Being Able To Enrich Uranium On An Industrial Scale; ElBaradei Says Ther's No Going Back, 'You Cannot Bomb Knowledge'

*** The BBC Feb. 20 Pointed To US Plans To Hit Iran's Nuke Sites & Other Targets, Such As Command & Control Centres And Strategic Military Bases

*** IAEA Report On Feb. 22 Said Iran Planned To Use 3,000 Centrifuges

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NICOSIA - Angola has joined the Organisation of Petroleum Exporting Countries (OPEC), African oil exploration is booming and China is investing heavily in Africa in competition with Western oil majors. The stampede for African oil continues, even as militant attacks in some countries and precarious governments in others make returns uncertain.

Though much of Africa is just as conflict-ridden as the Middle East, the continent is increasingly attractive because it is one of a diminishing number of regions welcoming foreign corporations. It is one of the few places where in virtually every country the international oil companies (IOCs) can invest.

The Middle East, which has nearly 60% of the world's proven oil reserves, operates mainly through state-owned companies. Russia, the second-biggest oil exporter after Saudi Arabia, took over much of its former oil giant Yukos early in 2006 and has continued to tighten its control over foreign companies. The Kremlin has been spearheading resource nationalism in Russia in recent years.

South American policies have become increasingly nationalistic. Venezuela has forced retooled contracts on IOCs. Bolivia in 2006 nationalised its petroleum industry. Strong leftist parties in Peru and Ecuador have made corporations increasingly wary. President Hugo Chavez of Venezuela, who regards Cuban ruler Fidel Castro as his hero, has politicised petroleum resources in Latin America.

Nationalisation is not an option for African countries with poor infrastructure and little expertise to develop the petroleum sector on their own. Mauritania, Africa's newest oil producer, was long only a potential oil exporter until a deal with a team headed by Woodside Petroleum of Australia led to offshore finds in 2001. Though the north-west African country's reserves are small by world standards - about 1 bn barrels - the government has estimated oil revenue of $350m in 2006, its first year of production. That is a major income for one of the world's poorest countries. Woodside owns the largest stake of the field at nearly 48%, and the Mauritanian government owns 12%.

China has become a major power in Africa, where it is leading the pack in the scramble for petroleum exploration and production (E&P) assets by its state-owned companies. In November 2006, Beijing hosted an Africa summit which attracted leaders from 48 African states and which highlighted China's diplomatic offensive to secure a growing stake in the continent's resources.

Sinopec, China's largest refiner of West African crude, is focused on Angola which is the main source of its purchases. It has 50% in a BP-operated portion of Angola's Block 18, which will produce about 220,000 b/d from May 2007 with the start-up of the Greater Plutonio field. Sinopec and Angola's state-owned Sonangol have a JV called Sonangol-Sinopec International (SSI) which aims to built up the Chinese company's acreage in Angola and elsewhere in Africa (see survey in omt9-AngolaFeb26-07).

CNOOC has paid $2.3 bn for a 45% stake in the Total-operated Akpo offshore field which will start up in 2008. CNOOC's share of its output will be about 80,000 b/d. CNOOC, Sinopec and other Chinese state-owned firms, including CNPC which is the biggest among them, are investing heavily in Africa's No. 1 oil producer Nigeria - upstream and downstream (see survey of Nigeria to be serialised in July/August by the APS Review). CNOOC has taken 75% in Equatorial Guinea's oil producing Block S from Hess and Chevron.

The Chinese and other Asian firms are nowhere near the dominant position of US and European oil majors in Africa, particularly in the west of the continent. West Africa's crude oil production capacity is set to rise from 4.84m b/d to more than 6.3m b/d. The US is aiming to raise its African crude oil imports from about 15% in 2006 to 25% by 2015.

Foreigners, therefore, show no signs of leaving Nigeria, even though the country's crude oil production capacity of 3m b/d has been cut by 20% in attacks by militant groups angling for a greater share of the oil wealth. Algeria hosts multinationals like Shell and Italian giant ENI, as well as US majors, in profit-sharing agreements with state-owned companies. In a stark contrast to Russia and Venezuela, the Nigerian government is making efforts to privatise more of its oil operations. The government has a majority share in Shell partnerships and the petroleum sector accounts for about 80% of Nigeria's revenue.

Still, African oil development has its own problems which can trump those of the Arab world. Nigeria, Angola and other African states are often near the top of the lists of the world's most corrupt countries. Much business in these countries takes place in an informal economy. And long histories of coups in many regions mean new governments cannot always be counted on to keep old promises. While Africa will never compete with the Middle East, there is plenty of oil to be found. The continent's proven oil reserves more than doubled between 1980 and 2005 to 114.3 bn barrels. That is a growth rate comparable to the Middle East and far outpacing a worldwide increase of 84% during the same period. African production rose about 60% during the same time and now accounts for over 12% of the world's oil.

There is enough demand that, though US and European companies have largely stayed away from politically charged Sudan, the country has found foreign investment from Asia. China is the primary foreign investor in Sudanese oil E&P and has not showed any signs of decreasing involvement, despite the continuing threat of UN sanctions over Sudan's refusal to allow UN peacekeepers in its Darfur region.

Over the past decade, many poor African countries have moved towards privatisation of state-owned firms under World Bank advice. In an October 2006 report, The World Bank encouraged Angola - Africa's second-largest oil producer after Nigeria and one of the continent's fastest economies - to do more to encourage private investment. Peter Egom, an economist and research fellow at the Nigeria's Institute of International Affairs, argues that Africa has the manpower and know-how to aspire to oil nationalism. He says the major stumbling block for African oil producers is the lack of financial means because nations with weak currencies have to compete in an industry where the US dollar is the currency of trade.

Venezuela is working hard to befriend to African states in a sign that the country could be pushing similar theories in resource nationalism. Chavez attended an African Union (AU) summit in Gambia last summer and pushed for South American-African partnerships. A conference between South American and African states in November 2006 ended with an accord to explore natural resource collaborations. Yet even as Africa tries to decide the best way to exploit its resource, the continent's promise of vast oil reserves has been overhyped.

Much of Africa's oil is more expensive to extract than oil in the Middle East - so it may be full of opportunity only as long as oil prices stay high. Jonathan Bearman, head of London-based Clearwater Research Services, which evaluates risk for energy companies, says: "The idea was that [Africa] was going to reverse the global decline. But I think some of the expectations have been moderated. The drilling results have not lived up to expectations". He notes that offshore wells in Nigeria have had a success rate of about one in three, compared with earlier success rates of one in two for onshore wells, adding: "The costs are going up and the pace of development is very slow".