Nigeria/China - oil

Chinese company in talks over major Nigerian oil contracts

by Laura Angela Bagnetto

Article published on the 2009-09-29 Latest update 2009-09-30 07:25 TU

An offshore oil and gas production platform at Amenam in the Niger Delta
(Credit: AFP)

State-run China Offshore Oil Company, or CNOOC, has made a bid for some 23 oil blocks in Nigeria in a major push to guarantee its energy security, according to a report put out Tuesday by British newspaper The Financial Times, raising questions as to the legality of such a large bid. Sources believe the bid is estimated at between 20.5 billion and 32.2 billion euros.

"This is the age of oil and the oil stakes are higher today than they have ever been before," says Cyril Obi, senior researcher at the Nordic Africa Institute in Uppsala, Sweden.

Western oil companies who are veterans in the West African petroleum community, including Shell, Total and Chevron, currently partially control the 23 blocks that will be coming up for contract renewal. Sixteen contracts have expired, two more will come up in 2019, and the remaining are offshore and due to expire in 2020.

If the contracts are awarded to CNOOC, it could prompt a major lawsuit from companies who currently own the bids. It is not clear as to how the ownership would be transferred.

"It's no longer business as usual for Western or multi-nationals who had free reign," says Obi. "What you see here is interplay between establishing and emerging powers, competing for oil in Africa. The African ruling elite is trying to protect itself in such a way that it can extract as much as possible by playing these competing interests," he adds.

But the push by China for a major stake in oil shares is nothing new, Obi tells RFI, as CNOOC bought a 45 per cent stake in offshore oil fields in Nigeria, and acquired four oil blocks in 2005.

This "is a situation in a post-Cold War world where the West is now faced with increasing competition with emerging powers in the East," says Obi.

China's no-strings policy is an attractive one for African leaders, particularly in Nigeria, contends Obi, as China offers 'Oil for Development' deals where countries are offered infrastructure projects such as roads, schools and civic halls in exchange for oil.

"You must understand this has its attraction for a continent that thinks it needs to assert its autonomy, it needs to assert its sovereignty," he says.

"Western companies do not offer this. Their home governments do not offer this, and when they do, it is always with so many conditions," he adds.

Chinese contracts usually come with imported Chinese labour, leaving a significant labour force in the country untapped. Obi says that the onus is on the Nigerian government to protect Nigerian workers so that any building would be staffed by Nigerian nationals.

He also maintains that China usually complies with domestic laws on labour practices, while a 2008 report from the Center for Strategic and International Studies shows that Nigerians report that "poor Chinese labour practices persist. Largely unchecked by the Nigerian government, the Chinese have a distinct advantage by paying “slave wages” for dangerous work that most Nigerians will not undertake," according to the report.

Obi contends that the deal proposed by China is up for discussion, and time will tell if China will be successful.

"What it does do is send a signal to western multi-nationals and western governments-- that the Nigerian government is in a position to give something that it values very highly to its competitors," says Obi.