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Special focus on African oil and minerals.

South African President, Mr Nelson Mandela is scheduled to officially open the Sub-Saharan Oil and Minerals Conference to be held in Johannesburg from 27-29th March. To underscore the importance of this conference, over 35 Cabinet Ministers from practically every Sub-Saharan African country will be attending and the list of expert speakers is probably the most comprehensive ever put together for such an occasion.

African Business is proud to be associated with the Sub-Saharan Oil and Minerals Conference. To coincide with the Conference, our Special Focus on African Oil and Minerals aims to provide a thorough but not too technical portrait of the sector throughout Sub-Saharan Africa. Guy Arnold starts off the Special Focus section with a rapid overview of the continent's oil and minerals sector.

Africa as a continent is rich in minerals, possessing an estimated 30% of the world's proven reserves. It is also well endowed with oil. But this begs the question: Why then, are so many countries with substantial mineral bases so chronically economically backward? A few countries with strong mining sectors - Botswana is a good example - are doing remarkably well, but in far more cases (Nigeria is another good example) political instability, poor planning and corruption has meant the enormous potential of minerals to transform economies has not been realised.

A group of countries in Southern Africa have huge proven resources although large areas have still not been fully mapped geologically. Angola (See page 16), relies upon its off for 60% of GDP Botswana (see Page 12) is a storehouse of minerals, most of which have yet to be exploited; Namibia's mineral wealth (see page 21) provides a high proportion of its GDP; and Zambia is one of the world's leading copper producers but also possesses zinc, lead, cobalt and some gold. Zimbabwe has a range of 40 minerals and is a leader in gold and chromium production and, of course, South Africa is one of the world's great mineral resource countries (see page 20).

But while these countries are the oil and mineral giants of Africa, it is worth examining the smaller producers, since they offer considerable potential for investment and expansion:

Benin possesses small off deposits: it developed two offshore wells in 1982 off Cotonou and by 1985 was producing 10,000 b/d. The original development was by Norway with IDA finance, but in 1985 a Swiss Company, Pan Ocean, took over from the Norwegians with the aim of developing five new wells and achieving a daily output of 25,000 b/d. Then the US company, Ashland, signed a management contract but development came to a virtual halt at the end of the 1980s because of the low word prices for oil.

Benin also possesses phosphates, chromium, rutile and iron ore in the north. As yet, none of these minerals are being exploited but there is steady mining of limestone, marble and gold.

Cameroon developed substantial offshore oil finds during the period 1970-1985 but exploitation slowed dramatically in the latter year due to low world prices In 1990, output reached 61m barrels with Elf as the lead company. At present, however, exploration is minimal. Known reserves now stand at 57.2m tons.

Other minerals include 1100m tons of bauxite, large deposits of iron ore and an estimated 10,000 tons of uranium.

Congo has one of the richest mineral bases of any country in Africa. Oil supplies two-thirds of Government revenues and has replaced forestry as the principal industry.

Oil was developed during the 1980s and in 1991 output reached 3,000 barrels equivalent to 76% of exports. Removable oil at present amounts to 50m tons but far larger resources exist though their exploitation will depend upon future prices and new recovery techniques.

There are an estimated 600m tons of heavy viscous petroleum in the Emeraude field although exploitation which will require steam injection techniques must await higher prices and greater world demand.

The state monopoly over oil by Hydro-Congo has ended and in 1990, Elf-Congo drilled its first offshore exploration well for seven years.

Congo also has large reserves of associated natural gas (though most of this is at present flared currently at the rate of 760 cum a year), as well as diamonds, lead, zinc, gold, copper, iron ore, phosphates and bauxite. However, such an apparently attractive list of minerals must remain unexploited until better economic times ensure higher prices, greater demand and, as a result, available capital for initial exploitation.

Cote d'Ivoire discovered small resources of offshore oil in 1977 but its fields had been worked out by 1990 and exploration ceased that year.

Gabon, Congo's neighbour in equatorial Africa, is another storehouse of minerals. In 1991, it produced 132.9m barrels of oil and oil accounts for 80% of all exports. With Nigeria, Gabon is one of the only two members of OPEC in Sub-Saharan Africa.

Until 1989, oil production was largely offshore but now it has also moved onshore. At present, 28 oil companies have exploration rights including Agip, Conoco, Phillips, Norsk Hydro, British Gas and Amerada Hess. Oil reserves are estimated at 130m tons. The national mining policy is open and attractive to would-be investors. In addition to oil, Gabon possesses 25% of the world's known manganese reserves outside the former USSR, an estimated 200m tons.

It also has huge iron ore deposits at Belinga though at present these remain unviable since there is too much elsewhere that is more accessible. Uranium production began in 1961 and now accounts for 6% of exports while manganese accounts for 8%. Gabon is one of the few countries in Africa in which mining is without question more important as a sector than is agriculture.

Ghana is another country with a range of minerals; including bauxite, gold, manganese and diamonds (a yield of 687,000 carats was recorded in 1992).

Gold now accounts for 15.5% of exports. The principal goldfield at Obuasi is operated by Ashanti Goldfields which is 43.1% owned by Lonrho, while the Government holds a 31.3% stake. The public flotation of the rest of the stock was a spectacular success. (See African Business, March 1995 issue).

In 1994, Ahanti produced 822,954 troy ounces of gold and the company expects to exceed the magic million mark this production year.

Although Ashanti Goldfields accounts for 75% of official gold production, other investments in the sector from private source are being encouraged. At present gold accounts for 80% of mining income. Ghana also produces industrial diamonds (see page 22)

Although in the 1950s Ghana exported 300,000 tons of bauxite a year this collapsed to 30,000 tons a year in the 1980s and while production recovered somewhat at the beginning of the 1990s, lack of a market and low prices are currently holding back production. Ghana now ranks as the world's eighth largest producer of manganese.

Both Guinea and Guinea-Bissau have extensive mineral deposits yet both remain among Africa's poorest countries.

Guinea possesses 25% of the world's bauxite resources and has the strongest mining sector in West Africa accounting for 23% of GDP. Bauxite and alumina account for 80% of foreign exchange earnings. They are followed in importance by diamonds and gold, while iron ore deposits near Mt Mimba await development.

Guinea-Bissau's weak infrastructure has raised costs of development to such an extent that there is little exploitation of the known large deposits of bauxite (200m tons) and phosphates (200m tons).

Senegal has reserves of 100m tons of calcium phosphates, 70m tons of aluminium phosphates and 330m tons of iron ore. There are crude oil deposits off the Casamance coast but these too are not at present worth developing due to world market conditions.

Mauritania has extensive iron ore deposits (4bn tons - among the largest in the world) which account for 50% of exports but is faced with a decline in world demand.

Three other mineral rich countries deserve special consideration. Zaire has long depended on the export of copper and cobalt as well as other minerals to keep its economy viable but is currently in such a sad condition politically that any development other than ongoing exploration seems unlikely (See page 19).

Similarly, Sudan has substantial oil deposits and in the 1980s, Chevron was considering financing a 1500 mile pipeline to transport oil from Kordofan region to the Red Sea but civil war has led to a cessation of company activities. In 1990 however, Chevron estimated that its own concession area there held 1bn barrels of oil, of which 270m could be extracted by existing technology.

Finally, there is the extraordinary case of Mozambique which possesses 6bn tons of coal; 360m tons of iron ore at a single site near Namapa, and confirmed resources of 60bn cu m of natural gas. It has ilmenite, bauxite, manganese, graphite, fluorite, platinum, nickel, uranium, asbestos, diamonds and gold. US, French, German and South African companies are currently prospecting oil offshore.
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Author:Arnold, Guy
Publication:African Business
Article Type:Cover Story
Date:Apr 1, 1995
Previous Article:An African Answer: The Key to Global Productivity.
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