• briefing asia infrastructure aug 15, 2006 • briefing asia energy aug 15, 2006

investments 57,359 149,829 116,823 24,825 (2,228)

Change in unrealized

appreciation/depreciation from

investments 303,281 853,521 795,015 175,129 24,415

-------- ---------- -------- -------- --------

..............................................................................................................................

Net realized/unrealized gains from

investment transactions 360,640 1,003,350 911,838 199,954 22,187

-------- ---------- -------- -------- --------

CHANGE IN NET ASSETS RESULTING FROM

OPERATIONS $353,746 $1,014,053 $970,568 $228,538 $ 42,755

-------- ---------- -------- -------- --------

-------- ---------- -------- -------- --------

--------------
(a) Represents amounts allocated from the Respective Portfolios.

21 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.

HSBC INVESTOR LIFELINE FUNDS

STATEMENTS OF CHANGES IN NET ASSETS

AGGRESSIVE GROWTH STRATEGY FUND GROWTH STRATEGY FUND

---------------------------------------------------------------------------------------------------------------------------------

FOR THE FOR THE

SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE

APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED

(UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b)

---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:

OPERATIONS:

Net investment income (loss) $ (6,894) $ (3,032) $ 10,703 $ 886

Net realized gains (losses)

from investment transactions 57,359 4,441 149,829 (1,238)

Change in unrealized

appreciation/depreciation from

investments 303,281 64,789 853,521 195,096

---------- ---------- ----------- ----------

CHANGE IN NET ASSETS RESULTING

FROM OPERATIONS 353,746 66,198 1,014,053 194,744

---------- ---------- ----------- ----------

..............................................................................................................................

DIVIDENDS:

NET INVESTMENT INCOME:

Class A Shares -- -- (22) --

Class B Shares -- -- -- --

Class C Shares -- -- -- --

NET REALIZED GAINS:

Class A Shares (4,248) -- (7,479) --

Class B Shares (4,512) -- (8,003) --

Class C Shares (298) -- (626) --

---------- ---------- ----------- ----------

CHANGE IN NET ASSETS FROM

SHAREHOLDER DIVIDENDS (9,058) -- (16,130) --

---------- ---------- ----------- ----------

CHANGE IN NET ASSETS FROM CAPITAL

TRANSACTIONS 2,223,270 1,380,998 7,346,115 5,395,978

---------- ---------- ----------- ----------

CHANGE IN NET ASSETS 2,567,958 1,447,196 8,344,038 5,590,722

..............................................................................................................................

NET ASSETS:

Beginning of period 1,447,196 -- 5,590,722 --

---------- ---------- ----------- ----------

End of period $4,015,154 $1,447,196 $13,934,760 $5,590,722

---------- ---------- ----------- ----------

---------- ---------- ----------- ----------

Accumulated net investment

income (loss) $ (8,380) $ (1,486) $ 5,685 $ (4,996)

---------- ---------- ----------- ----------

---------- ---------- ----------- ----------

See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 22

HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)


AGGRESSIVE GROWTH STRATEGY FUND GROWTH STRATEGY FUND

---------------------------------------------------------------------------------------------------------------------------------

FOR THE FOR THE

SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE

APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED

(UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b)

---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:

CLASS A SHARES:

Proceeds from shares issued $1,004,490 $ 693,884 $4,006,211 $2,731,568

Dividends reinvested 4,248 -- 7,500 --

Cost of shares redeemed (9,331) (9,512) (228,172) (26,214)

---------- ---------- ---------- ----------

Class A Shares capital

transactions 999,407 684,372 3,785,539 2,705,354

---------- ---------- ---------- ----------

..............................................................................................................................

CLASS B SHARES:

Proceeds from shares issued 1,144,612 690,126 3,144,997 2,623,574

Dividends reinvested 4,512 -- 8,003 --

Cost of shares redeemed (23,827) (13,505) (42,770) (35,907)

---------- ---------- ---------- ----------

Class B Shares capital

transactions 1,125,297 676,621 3,110,230 2,587,667

---------- ---------- ---------- ----------

..............................................................................................................................

CLASS C SHARES:

Proceeds from shares issued 98,268 20,005 449,735 102,957

Dividends reinvested 298 -- 626 --

Cost of shares redeemed -- -- (15) --

---------- ---------- ---------- ----------

Class C Shares capital

transactions 98,566 20,005 450,346 102,957

---------- ---------- ---------- ----------

..............................................................................................................................

CHANGE IN NET ASSETS FROM CAPITAL

TRANSACTIONS $2,223,270 $1,380,998 $7,346,115 $5,395,978

---------- ---------- ---------- ----------

---------- ---------- ---------- ----------

..............................................................................................................................

SHARE TRANSACTIONS:

CLASS A SHARES:

Issued 84,441 69,359 339,369 265,018

Reinvested 378 -- 664 --

Redeemed (800) (907) (19,884) (2,475)

---------- ---------- ---------- ----------

Change in Class A Shares 84,019 68,452 320,149 262,543

---------- ---------- ---------- ----------

..............................................................................................................................

CLASS B SHARES:

Issued 97,561 67,597 267,493 251,135

Reinvested 402 -- 705 --

Redeemed (1,947) (1,333) (3,575) (3,346)

---------- ---------- ---------- ----------

Change in Class B Shares 96,016 66,264 264,623 247,789

---------- ---------- ---------- ----------

..............................................................................................................................

CLASS C SHARES:

Issued 8,480 2,000 38,217 9,809

Reinvested 27 -- 55 --

---------- ---------- ---------- ----------

Change in Class C Shares 8,507 2,000 38,272 9,809

---------- ---------- ---------- ----------

Document MFPE000020060712e27a000b6
This Day (Nigeria) - AAGM: Nigeria to Earn $3 Billion from FDI in Non-Oil Sector--Iweala.
Constance Ikokwu

840 words

7 July 2006

This Day (Nigeria)

AIWTHD

English

The Financial Times Limited. Asia Africa Intelligence Wire. All material subject to copyright. This Day (Nigeria) (c) 2006 All rights reserved
Minister of Foreign Affairs, Dr. Ngozi Okonjo-Iweala yesterday said she is not about politics but poised to focus attention on her new role.
Okonjo-Iweala who was recently moved to the foreign affairs ministry said:"I am focusing on my new brief and not interested in politics".
Speaking to THISDAY yesterday in Abuja, she also said foreign direct investment (FDI) into the non-oil sector of the country is expected to hit about $3 billion annually.
The former finance minister said she was focusing on her new brief as Minister of Foreign Affairs and was interested in delivering on the agenda set for her by the President.
She said: "I've just got a new brief in this ministry and I am very much focusing on the work and on delivering on the agenda.
"I don't know anything about any political group and I feel we should be left alone to do our job. I want to make it clear that I am about focusing on my work as I have always been", she said.
On investments into the country, Okonjo-Iweala said the oil and gas sector is expected to yield even more with Korea's commitment to invest $6 billion in seven years while China will bring in between $4 - $5 billion.
According to her, $1 billion out of the FDI from the non-oil sector would go into telecommunications while the remaining will be channeled into other areas such as manufacturing, construction and real estate.
She said her ministry is more interested in the non-oil sector because it will create more jobs for the unemployed in the country.
Okonjo-Iweala said the country needs to move "a little more aggressively" in order to double non-oil FDI within the next five to six years adding that Nigeria's size requires urgent measures to be taken in terms of maintaining relationships with our traditional partners as well as striking new deals with countries in the emerging markets.
The minister said Nigeria's FDI comes mainly from China, South Africa, Korea and India.
According to her, Nigeria already has a memorandum of understanding (MoU) with these countries but stated that she hopes the relationship would grow adding "these countries also see Nigeria as an emerging economy, the reason why we need to sharpen our foreign policy and use it as a tool for our economic development."
"When we see China, we should see a large market that could absorb a lot of our agricultural products. When we see India and others, we should see a partner who will work with us in developing our manufacturing sector as well as technology. So our foreign policy should drive us towards that. We want to sharpen our foreign policy and put more economics into it," she said.
According to the minister, this goal could be achieved by working closely with other organs of government including the Nigeria Investment Promotion Commission (NIPC), the Ministry of Commerce and the Nigeria Export Promotion Commission (NEPC).
She said her ministry aims to make Nigeria an outsourcing centre where people can also have call centres.
Okonjo-Iweala also stated that "we should make a package pushing the same kind of policies that people can see. We should not be going around saying things and doing things in a discordant way. We need to articulate this very carefully and we need to be targeted. We really need to look at the markets that have potentials for our goods and if we do that, you will see that markets where you need to put in effort will not be many."
The minister told THISDAY that Nigeria's foreign policy will continue to be "Africa centred" in terms of working for peace, integration and co-operation on the continent.
She said Nigeria will focus on resolving conflicts on the continent because it is important for the country's development and pointing out that "lack of peace in other countries surrounding us means lack of FDI."
"The countries around you matter when you want to attract FDI. If the countries around you are all fighting, nobody will come. It's called the neighbourhood effect. It even has a name in economics. All the energy that the President has put into resolving conflicts is because he recognises this fact, that we need good neigbourhood if we are to develop economically."
She observed that her ministry has a competent staff that has been working under difficult circumstances which include lack of steady power supply and no internet connectivity but these, according to her, are being addressed.
She said her ministry has met with the Managing Director of the Power Holding Company of Nigeria (PHCN), Engr. Joseph Makoju to discuss means of having additional power supply.
This meeting, she said was successful and the problem of connectivity will be solved within the next one month.
Distributed by AllAfrica Global Media. (allafrica.com)
FTDL50037693
Document AIWTHD0020060707e2770000g

I'm Not About Politics, Says Okonjo-Iweala
by Constance Ikokwu

837 words

7 July 2006

08:18 AM

All Africa

AFNWS

English

(c) 2006 AllAfrica, All Rights Reserved
Abuja, Jul 07, 2006 (This Day/All Africa Global Media via COMTEX) --
Minister of Foreign Affairs, Dr. Ngozi Okonjo-Iweala yesterday said she is not about politics but poised to focus attention on her new role.
Okonjo-Iweala who was recently moved to the foreign affairs ministry said:"I am focusing on my new brief and not interested in politics".
Speaking to THISDAY yesterday in Abuja, she also said foreign direct investment (FDI) into the non-oil sector of the country is expected to hit about $3 billion annually.
The former finance minister said she was focusing on her new brief as Minister of Foreign Affairs and was interested in delivering on the agenda set for her by the President.
She said: "I've just got a new brief in this ministry and I am very much focusing on the work and on delivering on the agenda.
"I don't know anything about any political group and I feel we should be left alone to do our job. I want to make it clear that I am about focusing on my work as I have always been", she said.
On investments into the country, Okonjo-Iweala said the oil and gas sector is expected to yield even more with Korea's commitment to invest $6 billion in seven years while China will bring in between $4 - $5 billion.
According to her, $1 billion out of the FDI from the non-oil sector would go into telecommunications while the remaining will be channeled into other areas such as manufacturing, construction and real estate.
She said her ministry is more interested in the non-oil sector because it will create more jobs for the unemployed in the country.
Okonjo-Iweala said the country needs to move "a little more aggressively" in order to double non-oil FDI within the next five to six years adding that Nigeria's size requires urgent measures to be taken in terms of maintaining relationships with our traditional partners as well as striking new deals with countries in the emerging markets.
The minister said Nigeria's FDI comes mainly from China, South Africa, Korea and India.
According to her, Nigeria already has a memorandum of understanding (MoU) with these countries but stated that she hopes the relationship would grow adding "these countries also see Nigeria as an emerging economy, the reason why we need to sharpen our foreign policy and use it as a tool for our economic development."
"When we see China, we should see a large market that could absorb a lot of our agricultural products. When we see India and others, we should see a partner who will work with us in developing our manufacturing sector as well as technology. So our foreign policy should drive us towards that. We want to sharpen our foreign policy and put more economics into it," she said.
According to the minister, this goal could be achieved by working closely with other organs of government including the Nigeria Investment Promotion Commission (NIPC), the Ministry of Commerce and the Nigeria Export Promotion Commission (NEPC).
She said her ministry aims to make Nigeria an outsourcing centre where people can also have call centres.
Okonjo-Iweala also stated that "we should make a package pushing the same kind of policies that people can see. We should not be going around saying things and doing things in a discordant way. We need to articulate this very carefully and we need to be targeted. We really need to look at the markets that have potentials for our goods and if we do that, you will see that markets where you need to put in effort will not be many."
The minister told THISDAY that Nigeria's foreign policy will continue to be "Africa centred" in terms of working for peace, integration and co-operation on the continent.
She said Nigeria will focus on resolving conflicts on the continent because it is important for the country's development and pointing out that "lack of peace in other countries surrounding us means lack of FDI."
"The countries around you matter when you want to attract FDI. If the countries around you are all fighting, nobody will come. It's called the neighbourhood effect. It even has a name in economics. All the energy that the President has put into resolving conflicts is because he recognises this fact, that we need good neigbourhood if we are to develop economically."
She observed that her ministry has a competent staff that has been working under difficult circumstances which include lack of steady power supply and no internet connectivity but these, according to her, are being addressed.
She said her ministry has met with the Managing Director of the Power Holding Company of Nigeria (PHCN), Engr. Joseph Makoju to discuss means of having additional power supply.
This meeting, she said was successful and the problem of connectivity will be solved within the next one month.
Document AFNWS00020060707e2770009p
Mobile_saidly_contacts_Swiss_company_on_investment_in_Nigeria'>China Mobile saidly contacts Swiss company on investment in Nigeria
55 words

6 July 2006

Xinhua's China Economic Information Service

XNHA

English

(c) 2006 Xinhua News Agency. All Rights Reserved
BEIJING, July 6 (CEIS) – China Mobile, which freshly failed to buy Millicom, will start negotiations with a Swiss investment company on possible business opportunities in Nigeria.
Market hearsay goes that the Swiss company holds telecom licenses of a string of emerging- market countries including Nigeria.
Document XNHA000020060706e27600168
STATES

ISRO eager to launch Rs 800-cr `satnav' biz

Our Bureau

489 words

5 July 2006

Business Line (The Hindu)

BSNLNE

19

English

(c) 2006 The Hindu Business Line
`India set to become biggest user of satellite navigation'
The Rs 800-cr satnav pie Standard GPS receivers Navigation software Chip sets in mobiles Onboard atomic clocks Internet connectivity for positioning Network timing maintenance GIS maps Bangalore , July 4 Satellite navigation holds potential for a global business valued at about some Rs 15,000 crore a year. Today, virtually everyone and every country wants to be involved with satellite navigation (satnav); in India alone, the sector could be a Rs 800-crore proposition by 2010, says Dr Suresh V. Kibe, Programme Director, Satellite Navigation, ISRO/Department of Space. On the radars of those investing billions in satnav are the downstream retail users ranging from airlines and civil aviation authorities seeking precise landing points to logistics and truck fleet operators, ships, rescue workers, mapping, land survey, precision farming, national security and even a car driver seeking directions. "You could even be searching on your cell phone for a particular shop in a mall"; such is the huge scope of PNT (positioning, navigation, timing), according to Dr Kibe. The hardware makers have reason to cheer, too: they will be needed for supplies of receiver sets, chips in mobile handsets, GIS maps, super-precise atomic clocks and more. So much so that satnav-savvy countries have hogged the L-5 bandwidth — considered the `gold band' for satnav — for emerging uses such as 3G, wi-fi and Wimax and making it scarce for others. And it's not just the space-faring countries such as US, Russia, Europe, Japan, China or India, even Nigeria has sought L5 for its Nigcomsat project. "The day is not far when mobile phones will be fitted with navigational systems," Mr G. Madhavan Nair, Chairman of ISRO, told an industry meeting on satellite navigation organised by ISRO on Tuesday. ISRO is tempting the industry with satnav opportunities in the manufacture of low-cost receivers and PNT chips, software development, installation, research and, eventually, retail applications. "GNSS (global navigation system) will influence our lives more than any other technological advent... India can become the biggest user of GNSS ," said Dr Surendra Pal, Deputy Director, Digital Communication Area at ISRO. Since 1995, the 28-satellite US GPS and the 24-satellite Russian GLONASS systems control the positioning scene. Europe is putting up a global Galileo — a 30-satellite, 3-billion system — in 6-8 years to rival GPS. China is opting for a less expensive, regional COMPASS. ISRO too is building a Rs 1,420-crore regional satnav constellation, called the Indian Regional Navigation System (INRSS). Mr Nair said, "In six years we will have our own constellation, controlled by us, for accurate signals", in the nick of time. Thanks to 100 million mobiles, a future set for 3G/4G/multimedia and value additions to phones, Dr Kibe said the PNT servicing in India is waiting to happen.
Document BSNLNE0020060704e2750002s

DJ Nigeria Hires Brazilian Firm To Develop Ethanol Law
510 words

3 July 2006

01:39 PM

Dow Jones Commodities Service

OSTDJ

English

Copyright 2006, Comtex News Network. All Rights Reserved.
SAO PAULO, Jul 03, 2006 (DJCS via Comtex) --
Nigeria's state-owned oil firm, Nigerian National Petroleum Company, or NNPC, has hired Brazilian law firm Tauil, Chequer & Mello to help develop the country's ethanol legislation, confirmed a spokesman for the Rio de Janeiro-based law firm on Monday.
The Brazilian firm is working together with Nigerian law firm Aelex to develop laws for the obligatory mix of ethanol into gasoline, the creation of fiscal incentives and investments in the ethanol sector, and the regulation of ethanol imports and exports, said the spokesman.
"The information that I have is that Nigeria is looking to create the entire juridical base for the ethanol industry before the government mandates an obligatory mix into gasoline, including how to encourage investments in the area, how to commercialize the sector, which includes exports and imports, and probably a regulatory agency as well," said the spokesman in a phone interview with Dow Jones Newswires.
The contract was signed in April and the office is expected to deliver its work in October.
Tauil, Chequer & Mello has done projects before with NNPC, which is why the office was chosen for this work, said the spokesman.
While it is the first time the law firm has been contracted to work on ethanol legislation, "other governments are also interested in the creation of ethanol legislation, for example, China and Angola have approached us as well about this," added the spokesman.
Tauil, Chequer & Mello - which also has offices in the Brazilian cities of Vitoria and Macae - has a partnership with major U.S. law firm Thompson & Knight, and has worked in the areas of petroleum, gas, energy and infrastructure throughout Latin America, Angola and China.
In May, Nigeria imported nearly 7.9 million liters of Brazilian ethanol, according to trade data compiled by the Agricultural Ministry.
In addition, Brazil's state-owned oil firm Petrobras SA and NNPC have been in talks since last year to negotiate a contract guaranteeing regular monthly shipments of Brazilian ethanol to Nigeria.
Last August, the two companies signed a memorandum of understanding to work on a feasibility study of Nigeria's potential, including the construction of ethanol plants and the cultivation of large areas of sugarcane and cassava.
While the contract is still being negotiated, Petrobras is planning on sending a first shipment of ethanol to Nigeria in August or September, said Petrobras' downstream director Paulo Roberto Costa in an email message to Dow Jones Newswires.
Nigeria is the world's sixth-largest petroleum exporter, but is looking to reduce the country's dependence on expensive gasoline imports by turning to ethanol.
Nigeria has the potential to consume 3 million liters of ethanol a day, according to Petrobras estimates.
Brazil is the world's No. 1 sugar producer and exporter as well as the leading cane ethanol producer and exporter.
-By Grace Fan, Dow Jones Newswires; 55 11 3145 1489; [e-mail]
(END) Dow Jones Newswires
07-03-06 1739ET
Document OSTDJ00020060703e273002e8

Nigeria Hires Brazilian Firm To Develop Ethanol Law
501 words

3 July 2006

05:39 PM

Dow Jones Commodities Service

DJCS

English

(c) 2006 Dow Jones & Company, Inc.
SAO PAULO (Dow Jones)--Nigeria's state-owned oil firm, Nigerian National Petroleum Company, or NNPC, has hired Brazilian law firm Tauil, Chequer & Mello to help develop the country's ethanol legislation, confirmed a spokesman for the Rio de Janeiro-based law firm on Monday.
The Brazilian firm is working together with Nigerian law firm Aelex to develop laws for the obligatory mix of ethanol into gasoline, the creation of fiscal incentives and investments in the ethanol sector, and the regulation of ethanol imports and exports, said the spokesman.
"The information that I have is that Nigeria is looking to create the entire juridical base for the ethanol industry before the government mandates an obligatory mix into gasoline, including how to encourage investments in the area, how to commercialize the sector, which includes exports and imports, and probably a regulatory agency as well," said the spokesman in a phone interview with Dow Jones Newswires.
The contract was signed in April and the office is expected to deliver its work in October.
Tauil, Chequer & Mello has done projects before with NNPC, which is why the office was chosen for this work, said the spokesman.
While it is the first time the law firm has been contracted to work on ethanol legislation, "other governments are also interested in the creation of ethanol legislation, for example, China and Angola have approached us as well about this," added the spokesman.
Tauil, Chequer & Mello - which also has offices in the Brazilian cities of Vitoria and Macae - has a partnership with major U.S. law firm Thompson & Knight, and has worked in the areas of petroleum, gas, energy and infrastructure throughout Latin America, Angola and China.
In May, Nigeria imported nearly 7.9 million liters of Brazilian ethanol, according to trade data compiled by the Agricultural Ministry.
In addition, Brazil's state-owned oil firm Petrobras SA and NNPC have been in talks since last year to negotiate a contract guaranteeing regular monthly shipments of Brazilian ethanol to Nigeria.
Last August, the two companies signed a memorandum of understanding to work on a feasibility study of Nigeria's potential, including the construction of ethanol plants and the cultivation of large areas of sugarcane and cassava.
While the contract is still being negotiated, Petrobras is planning on sending a first shipment of ethanol to Nigeria in August or September, said Petrobras' downstream director Paulo Roberto Costa in an email message to Dow Jones Newswires.
Nigeria is the world's sixth-largest petroleum exporter, but is looking to reduce the country's dependence on expensive gasoline imports by turning to ethanol.
Nigeria has the potential to consume 3 million liters of ethanol a day, according to Petrobras estimates.
Brazil is the world's No. 1 sugar producer and exporter as well as the leading cane ethanol producer and exporter.
-By Grace Fan, Dow Jones Newswires; 55 11 3145 1489; [e-mail] [ 07-03-06 1739ET ]
Document DJCS000020060703e273000oj
Oil: Economic war for Africa's loyalties begins
Ford, Neil

1,531 words

1 July 2006

African Business

AFBZ

20

Issue 322; ISSN: 01413929

English

Copyright (c) 2006 Bell & Howell Information and Learning Company. All rights reserved.
By targeting Africa's oil sector, China has now entered territory that has traditionally been the hunting ground of the Western oil majors. Is an economic clash between China and the US over Africa's resources inevitable? Neil Ford reports.
Much has been written about the impact of the Chinese economic boom on global oil supplies. Although China consumes far less oil per head of population than the citizens of the US, for example, Chinese domestic oilfields have been unable to keep up with rocketing demand for refined petroleum products. The country has gone from being a net exporter as recently as the early 1990s into a nation that must import 3m barrels a day (b/d), thereby helping to drive the oil price above $70 a barrel.
Yet far less coverage has been given to the effect that this has had on Beijing's relations with the oil producing regions of the world, including sub-Saharan Africa.
The oil industry in sub-Saharan Africa has traditionally been dominated by the majors. State-owned African companies have held equity on many concessions, but this has largely been at the insistence of host governments rather than because of their technical expertise or financial input.
At the same time, foreign independent oil firms have played an important role in opening up new areas for exploration and in developing marginal fields, but the lion's share of investment has been provided by the Western majors.
The current situation, however, could be changed by the increasing involvement of Asian oil companies in Africa. Petronas of Malaysia, ONGC Videsh of India and particularly the Chinese firms have begun to increase their African interests. This is partly a function of the growing economic strength and confidence of the larger Asian economies but it is also a result of their thirst for energy resources and security considerations. China was largely self-sufficient in energy supplies until relatively recently: apart from its own oilfields, it was able to provide almost all of its power .sector feedstock out of domestic coal reserves and, to a lesser extent, gas fields.
While coal will remain an important element in the Chinese generation mix, demand for electricity increased by a massive 15% last year and so the power sector is being expanded on a huge scale. As a result, gas supplies will become a far more important source of energy. Pipelines from Russia are likely to supply some of the gas, while two liquefied natural gas (LNG) terminals are being constructed on the south coast to import Indonesian and Australian LNG.
Yet Beijing is keen for Chinese state-owned companies to take control, or at least large stakes, in gas as well as oil fields overseas in order to improve energy security, particularly as domestic oil production is increasing by just 2% a year.
Frenetic pace of activity
Sub-Saharan Africa is one of the fastest growing oil and gas arenas in the world and so has proved an ideal target for China National Offshore oil Corporation (CNOOC) and the other Chinese oil companies. It was CNOOC's purchase of a stake in Nigeria's OML 130 block tor $2.3bn that really put Chinese investment on the map but even more substantial investment could be forthcoming.
From the African point of view this is a welcome development. More oil companies are now chasing an ever smaller pot of available exploration acreage. This should boost signing-on lees and enable African governments to push for more favourable terms of investment.
At a time of $70 a barrel oil prices and little sign of a major collapse in the market, the entry of Chinese and other Asian firms into the African oil industry could also encourage the development of more marginal oilfields.
Before the South Atlantic Petroleum deal, Chinese overseas investments were concentrated in countries that had difficult relations with the US, notably Iran and Sudan. However, the move into Nigeria could not only increase competition between oil companies but also between rival economic powers.
The US has long sought to reduce its dependence on Middle Eastern oil and African oil fields have been viewed as ideal sources of supply because of the unconstrained nature of the sea lanes between the Gulf of Guinea and the US eastern seaboard.
Anthony Lake, the co-chair of the US Council on Foreign Relations, reported: "By 2010, Africa could be providing the United States with as many oil imports as the Middle East ... it is increasingly in US interests to locate new oil sources outside the Middle East."
It has widely been reported that Washington is seeking to boost the share of its oil imports supplied by sub-Saharan Africa from 15% at present to 25% by 2015. However, Beijing now appears to be pursuing a similar policy and 28% of Chinese oil imports already come from African countries, including Angola, Congo-Brayxaville and Sudan.
Oil can be bought on the open market or through bilateral deals with African state oil companies, so China will undoubtedly continue to purchase much of its requirements by these means. However, the control of oilfields by Chinese companies that are either fully or partly state-owned would provide even more strategic insurance.
Competition between China and the US for influence in Africa and for African oil supplies could intensify over the next few years. US oil firms have a longer track record in Africa, have more technical expertise and greater financial clout, yet most African states, including the oil producers, are desperate for infrastructural investment and Beijing is prepared to offer such a commitment in conjunction with oil deals.
For example, during his visit to Angola last year, China's Vice-President Zeng Peiyang signed a number of upstream and downstream oil agreements that will give Chinese firm Sinopec a foothold in the country.
However, he also ottered interest free loans and $400m in investment from China's ZTE Corporation in the telecoms sector. It could be difficult for private oil companies to compete when such agreements appear to be bundled together. Then, in May this year, the Chinese government agreed to lend Nigeria $1bn to help rehabilitate its railway infrastructure and buy new rolling stock.
It will be interesting to see how the different approaches of the Western and Chinese companies play out. Unlike during the Cold War, when Africa was the battleground and the scene of a great deal of devastation, the continent could be the winner this time around.
If the Chinese government and companies are prepared to invest in projects that others are loath to touch, then Africa will at least benefit from additional infrastructure. At the same time, increased competition should make African oil and gas even more valuable. An economic war for Africa's loyalties could help to balance out some of the harm done by the military Cold War.
OIL
China's large scale African investments
Large scale Chinese investment in the African oil industry has long been mooted but it was only with January's deal in Nigeria that this appeared to become reality. China National Offshore oil Corporation (CNOOC) bought a 45% stake in the OML 130 concession from South Atlantic Petroleum for $2.3bn.
The block contains the established Akpo field, including around 600m barrels of condensate and 2.5 trillion cubic feet (tcf) of gas, while further discoveries on the block's substantial deepwater acreage seem likely. The remaining equity in the concession is held by Total (24%), Petroleo Brasileiro (16%) and the NNPC (15%).
The chairman and chief executive of CNOOC, Fu Chengyu, said that the purchase would give his company access to "an oil and gas field of huge interest and upside potential, located in one of the world's largest oil and gas basins".
Chinese National Petroleum Company (CNPC) owns a 40% stake in the Greater Nile Petroleum Operating Company (GNPOC) in Sudan. Alongside Petronas (30%), ONGC Videsh (25%) and Sudapet (5%). GNPOC operates the Heglig and Unity fields in the Muglad Bain, around 700km southwest of Khartoum, from where oil is piped to the Red Sea oil terminal of Suakln for export to China and elsewhere.
Sudan is already the third biggest oil producer in sub-Saharan Africa, behind Nigeria and Angola, and the Sudanese government predicts that output could reach 750,000 b/d by 2008, so CNPC is likely to increase its investment in the country. Elsewhere, Sinopec was awarded a deal to develop Angola's offshore Block 3, while the Chinese government has agreed to participate in the construction of the proposed 200,000 b/d Lobito oil refinery.
Copyright International Communications Jul 2006
Document AFBZ000020060724e27100003

Business

Thirst for oil fuels China's grand safari in Africa

Gabriel Rozenberg, Jonathan Clayton and Gary Duncan

1,987 words

1 July 2006

The Times

T

54

English

(c) 2006 Times Newspapers Limited. All rights reserved
Gabriel Rozenberg, Jonathan Clayton and Gary Duncan report on the trade flowing into the world's poorest continent.
THE battered signs in the lobby of the main international hotel in Lubumbashi, capital of Congo's mineral-rich Katanga province, had barely changed in years.
Next to the faded, out-of-date insignia of the traditional European airlines, they give details of all direct and non-direct flights to Paris, Brussels, Zurich, and London -the favoured destinations of the frequent visitors from Europe's mining houses.
A few months ago, however, Kenya Airways -Africa's fastest growing airline - proudly declared in bold new colours the latest additions to its network direct flights to Guangzhou and Hong Kong.
To many, the difference in signs symbolised Africa's changing relationships with the world -one with Europe, old and out-of-date, the other with China, brash and growing.
Few people in the former Belgian Congo were surprised at the development. They have watched over the past two years as the number of Chinese businessmen on flights in and out of the country has grown from a trickle to a torrent, matched by similar incursions into neighbouring Zambia and Angola.
"They started coming in about two years ago, but they were small-time merchants and set up as middlemen buying from local outfits," said Jean-Pierre Kabongo, who runs a miners' association in Katanga. "Now they are buying the companies themselves."
China is moving into Africa on a grand scale. Still a developing nation itself, it has nonetheless now overtaken Britain to become the continent's third-biggest trading partner after the United States and France. Its inroads into the world's poorest continent are the the most striking sign of the biggest shake-up in patterns of world trade in a generation.
The pace of change is startling: in the first four months of this year, Chinese imports from African countries totalled nearly $9 billion (Pounds 4.9 billion) -a small figure by world standards, but up by more than 50 per cent from the same period a year ago. In 2005 total trade flows reached $39.8 billion, a doubling in volumes in just two years, and nearly four times the level of trade in 2001.
For the world's fastest growing economy, Africa is first and foremost a supplier of oil. In Sudan, state-owned oil companies have been investing since Western companies left in the mid-1990s. In 1996 China bought a 40 per cent stake in two oilfields and since 1998 it has helped to build a 930-mile pipeline from the fields to the Red Sea. Last year it bought 50 per cent of Sudan's oil exports, accounting for 5 per cent of its needs.