• Chinese president meets Chinese, Nigerian businessmen

Phone: [phone]
Fax: [phone]
http://www.asiapulse.com
Document APULSE0020060227e22r001s2
This Day (Nigeria) - AAGM: Trade With China Hits $3bn Mark.
Funmi Peter-Omale And Kingsley Nwezeh

463 words

26 February 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
Trade between Nigeria and China has hit the $3 Billion mark, Chinese Ambassador to Nigeria, His Excellency Wang Yongqiu has said.
Yongqui said this at a reception organised to commemorate 35-years of diplomatic relations between the two countries.
According to Yongqiu, steady increase in the economic interaction between Nigeria and China is an indication of the extent of the countries' economic cooperation.
He said "looking back, we can see there were steady increases in economic interaction between our two peoples. For example,, in 1960, our bilateral trade volume was less than U$1 million.
"In 1970, it reached $4.5 million while in the last decade, it had grown rapidly.
"In 1998, the volume was $384 million and by 2001, it recorded a break-through of $1 billion. In 2004, another breakthrough was recorded as the two- way trade between the two countries reached $2 billion. By the end of last year, our bilateral trade has reached approximately $3 billion," he said.
Yongqui said Nigerian exports to China, excluding oil, has more than quadrupled, saying the Chinese government was ready to help Nigeria develop its non-oil sector, and import more agricultural products from Nigeria.
Besides, the envoy said China had made enormous direct invests in various sectors of the Nigerian economy, adding that Nigeria was one of the most important recipient country of Chinese Foreign Direct Investment in Africa. Chinese investments include such fields as oil and gas, iron and steel, machine manufacturing, cement, consumer electronics, motorcycle assembling, ocean fishing, pharmaceutics, telecommunications equipment, and so on. Statistics show that total volume of Chinese investment in Nigeria has exceeded USD 3 Billion. The most prominent characteristic of China economic cooperation with Nigeria, and Africa as a whole, is its unreserved transfer of technology to the African countries.
On the issue of Nigeria relations with Taiwan, the Ambassador deplored the 1990 MOU between Nigeria and Taiwan saying it was a aa?A"derailment of Nigeria one-China policy and a regrettable set back in the development of or bilateral relations.
The so-called aa?A"Trade Missionaa?? of Taiwan in Abuja now becomes a platform for Taiwanese secessionists activities in Nigeria and West Africa, not to mention its constant irritating effects on the sound development of our cordial relationship. What the so-called Trade Mission is doing in Abuja is to try to have official relations with Nigeria or create a misconception that Nigeria has diplomatic ties with Taiwan.
Yongqiu said last month, China signed a Memorandum of Understanding with Nigeria on the Establishment of Strategic Partnership. Nigeria becomes the first African country to sign such pact with China.
Distributed by AllAfrica Global Media. (allafrica.com)
FTDL47444624
Document AIWTHD0020060228e22q0001z
China In Africa

CHINA'S AFRICAN SAFARI In the heated race to tap a continent's oil resources, Chinais making headway in countries like Nigeria, where others often fear to tread.

VIVIENNE WALT

3,325 words

20 February 2006

Fortune Asian Edition

FORTUI

68

English

Copyright (c) 2006 Bell & Howell Information and Learning Company. All rights reserved.
On a broiling December morning in the Niger Delta, a dozen men clamber into a boat and head up a creek through a mangrove swamp to meet the curious foreigners who have arrived at the edge of their fishing village. Over warm beers, Sokulprim Welsh, a slender, 32- year-old Kula community leader, tells the newcomers that his village wants their help in return for its hospitality. "We have no telephone," Welsh says. "We have no doctor."
Over the years Welsh has made similar appeals to other foreigners who have come digging for the priceless bounty under the delta: an estimated 34 billion barrels of crude oil.
But these foreigners are different from any he has met before. They are from China.
With its ramshackle houses perched along a crumbling wharf on Nigeria's Atlantic coast, little Kula finds itself in the midst of a global high-stakes scramble. China has come hunting for oil to fuel its rocketing economy, increasingly muscling into areas where Western competitors have long enjoyed significant clout, offering to fix railways, power grids, and refineries in order to secure contracts. In what began as an almost stealth move into Africa during the early 1990s, Chinese trade has proliferated so quickly in the past few years that in countries such as Zimbabwe and Angola it threatens to eclipse relationships that the U.S. and Europe have nurtured for decades. U.S. officials estimate that China's trade with Africa has nearly tripled since 2002 and could top $30 billion this year. That still lags behind the nearly $50 billion in trade between the U.S. and 47 sub-Saharan countries last year. But China's sprint through Africa is accelerating fast, driving up the price of minerals and the signing bonuses on new oil contracts. Chinese companies are mining copper in Zambia, diamonds in Sierra Leone, and cobalt in the Democratic Republic of Congo. They're logging timber in Mozambique, Gabon, and Equatorial Guinea. And in early January, one state-owned company--China National Offshore Oil Corp., or CNOOC- -paid $2.3 billion for a stake in an oilfield in the delta, China's largest single investment in Africa to date.
Sitting in her office in Abuja, Nigeria's capital, Ngozi Okonjo- Iweala, the country's Finance Minister, can hardly conceal her happiness at China's increasing influence. "China is a giant market with giant needs, and we can fulfill them," says Okonjo-Iweala, a former World Bank vice president. Unlike the Americans and Europeans who arrived before them, Chinese executives have landed in countries where their government has no historical ties and friends are scarce. Their museums own few African treasures. African leaders have been groomed in capitalist Western institutions, not in Beijing. Okonjo-Iweala, who graduated from Harvard and MIT, says that, perhaps because the Chinese are such outsiders, they went almost unnoticed at first. "It took some time," she says, "for the West to wake up and find out the Chinese were getting a foothold in Africa."
It would be foolhardy--indeed difficult--to miss China's presence in Africa now. The world's second-largest energy consumer, China imports about 28% of its oil and gas from sub-Saharan Africa. By comparison, the U.S. gets 15% of its oil from the region, but it is hoping to boost that figure in order to lessen its dependence on the Persian Gulf. The strategy is already pitting Washington in a head- on contest with China, one that could get a lot hotter as Chinese oil companies expand their drilling across areas where Chevron, Shell, and Exxon Mobil have long been dominant and in countries where armed conflicts or corruption have kept Westerners at bay.
World oil and minerals prices have soared as China's hunger for materials has brought its companies into relatively obscure African markets, generating billions of dollars in new revenue for the world's poorest countries and creating a potentially fierce race for resources with the West. "By American companies' not taking more initiative in Africa, we're going to lose important market share to the Chinese," says Stephen Hayes, president of the Corporate Council on Africa, a nonprofit business group in Washington, D.C.
In the past few years China's three leading energy companies-- Sinopec, China National Petroleum Corp., and CNOOC--have signed oil contracts in Gabon, Equatorial Guinea, Algeria, and Angola. President Hu Jintao's Africa trips have included pocket-sized Gabon, whose 1.4 million people could fit into a corner of Shanghai but which has more than two billion barrels of oil reserves. China's Foreign Minister Li Zhaoxing toured the region in January, spending several days in Nigeria. "We haven't been totally invaded by China yet, but it will come," says Iheanyi Ohiaeri, head of business development for Nigeria's National Petroleum Corp., which controls some of Africa's largest oil and gas reserves. "I get calls and e- mails daily from Beijing, from people looking to buy oil."
But plumbing Africa's riches is going to take more than cold calls from traders. There are few better ways to gauge how tough the task is than to venture through the Niger Delta's mangrove swamps and narrow creeks. Stretching over 8,000 square miles, the delta is the size of Rhode Island and Connecticut combined, and it holds one of Africa's richest sources of the light crude highly prized by refineries in the U.S. and Europe. By boat, with a ten-horsepower engine bolted to the back, it takes 90 minutes to snake through the water from Port Harcourt to China National Petroleum's barge docked near Kula. The clammy 100-degree heat and high humidity attract hordes of mosquitoes that carry potentially deadly malaria. For years, groups of armed rebels have lurked in the swamplands along these tributaries, training in explosives use for their regular bombings of oil pipelines and wellheads. The most recent attacks came in early January, when rebels blew a large hole in a pipeline several hundred miles from Kula, kidnapped four Shell workers, and set fire to four flow stations. The violence forced Shell to cut its Nigeria output by 210,000 barrels a day, helping push world oil prices to about $66 a barrel.
As the boat chugs into Kula at sunset, a fierce argument is raging on the jetty between residents and soldiers and police officers who are there to sniff out troublemakers. Finally a soldier fires his Kalashnikov into the air, and two shots explode, scattering the crowd. That night two white visitors are advised to stay indoors, lest they be arrested by police or attacked by locals.
Risks like these do little to deter China, whose companies view Africa as a purely commercial prospect. But that hard-boiled commercialism has its dark side. China refuses to join in Western rebuke of African corruption and human-rights abuses. Much like the militant Islamic officials in Tehran--another of China's key oil suppliers--many African leaders regard China as a balance to Western meddling. Heavily dependent on its Sudanese oil imports, China last year used its permanent seat on the UN Security Council to block genocide charges against Sudan for the massacres in Darfur. "The U.S. will talk to you about governance, about efficiency, about security, about the environment," says Mustafa Bello, head of the Nigerian Investment Promotion Commission, who has visited China seven times. "The Chinese just ask: 'How do we procure this license?' "
China has also become the biggest foreign investor in Zimbabwe, where President Robert Mugabe's policies have beggared the country and left millions homeless. Zimbabwe doesn't have oil, but it is the world's second-largest exporter of platinum, a key import for China's auto industry. Chinese radio-jamming devices block Zimbabwe's dissident broadcasts, and Chinese workers built Mugabe's new $9 million home, featuring a blue-tiled roof donated by the Chinese government. While Western politicians railed against Mugabe last year for flattening entire shantytowns, China was supplying him with fighter jets and troop carriers worth about $240 million in exchange for imports of gold and tobacco. China has also agreed to sell armaments to Nigeria--$251 million worth of Chinese fighter jets financed by China's Exim Bank and satellite technology provided by defense contractor Norinco.
Left to conduct business without fear of moral outrage or protests back home, China has ventured into territory where Western companies often fear to tread. "If China wanted to go out and develop Europe, it would be impossible," says Dai Adi, a Chinese journalist in Lagos who moved from Beijing in 2001 as Chinese executives began flooding into the region. "But here they can."
In Lagos, where 15 million people live, a Chinese company last year built a crimson-walled replica of Beijing's Forbidden City, which towers over a hardscrabble neighborhood, its fortress walls enclosing a Chinese-imports emporium selling cheap textiles and plastic sandals. Since 2003, China has become the biggest importer of Nigeria's cassava crop, the staple for millions of farmers. Hundreds of Chinese rice farmers now live in Nigeria as part of a program to train Africans how to cultivate the crop. Across the street from Dai's office, Chinese telecommunications giant Huawei Technologies recently moved into the top four floors of a modern high-rise with a sweeping view of the city. Five years after first setting foot in Africa, Huawei now operates in 39 sub-Saharan countries and last year landed an $800 million contract to build base stations for mobile phones in Nigeria, a country with 130 million people and few landline phones. Last fall Chinese officials approached Dai to help them plan their newest initiative: starting Mandarin classes for Nigerian officials and businessmen. Dai says they were inspired by the European colonialists, who taught generations of Africans to speak English and French. "They thought, 'Why not Chinese?' "
African officials are increasingly asking the same question. After more than a century of trade with the West and discoveries of vast quantities of raw materials, African poverty remains crippling. Millions still subsist on pennies a day. Many Africans, disillusioned with Western leaders, think China might better understand their problems of underdevelopment. Last July hundreds of thousands of Americans and Europeans rocked to songs calling on leaders to cancel Africa's debt. At the G-8 summit days later, President Bush and other leaders wrote off about $40 billion worth of debt from 18 countries, almost all of them African. But the congratulations were mixed with an uneasy sense that Western leaders were late to the issue. Two years before, China had canceled $1.3 billion in African debt, paving the way for business across the continent. "Africa doesn't need concern about its plight," says Pat Utomi, 50, a U.S.-educated economist and professor at Lagos Business School who sits on several corporate boards. "It needs partners to do business with."
China has used one crucial advantage over its Western competitors: ready access to government coffers. Its oil deals in Africa--the kind from which Western shareholders would likely run screaming--grease the way with promises of infrastructure development. PetroChina signed its first significant oil deal in Nigeria last summer, securing 30,000 barrels a day for the next five years, in return for China's financing two badly needed power stations. China has also bid to buy one of Nigeria's old oil refineries--a sure money loser--as a way of cementing its ties with the government. "These aren't the sexy, easy areas," says Finance Minister Okonjo-Iweala, whose office is powered by a backup generator to cope with frequent blackouts. "China looks at relationships in a long-term fashion." More bluntly, the government's oil-business development manager Ohiaeri says Nigeria can pressure China far more than Western governments. "They are desperate for our resources," he says.
Even before China's energy shortage hit, it had seized opportunities in Africa. In the late 1980s, when U.S. sanctions against Sudan's Islamic government forced U.S. companies out of Africa's biggest country, CNPC took over Chevron's discarded assets. Now China is Sudan's biggest foreign investor, spending about $4 billion a year and importing about 7% percent of its oil from the African nation. China built a 930-mile pipeline from the oilfields to the Red Sea and is also laying electrical power lines, building a dam, and financing a water pipeline across the desert.
Yet for all its new relationships, the Chinese in Africa seem unable to shake off their sense of being outsiders. Take Zhao Liming, a pale, slim drilling engineer who manages a new gas rig an hour west of Port Harcourt that is owned by Sinopec subsidiary Henan Petroleum Exploration Bureau. Sheltered from the blistering heat in an air-conditioned trailer that serves as his office, Zhao says he arrived last May on his first African assignment. More than 7,000 miles from his wife, child, and three bicycles, he admits the culture shock is still intense. The previous week he had suffered a bout of potentially lethal malaria and was raced to the nearest hospital, an hour away, under military escort, watching nervously for a possible ambush by rebels. Zhao searches for a few moments to describe his current life, before saying in his rudimentary English: "Traditions different here."
Liu Shukao, a CNPC engineer sipping iced tonic water in the lobby of the Sheraton hotel in Abuja, says it's difficult setting appointments with officials. "The big men are always busy, and they are always traveling," Liu says with a sigh. Privately, some of those "big men" say they too find it difficult to negotiate with Chinese oil companies, since each detail requires approval from government officials in Beijing. "It is very, very slow," says Tony Chukweke, head of Nigeria's Department of Petroleum Resources. "They go back and forth. And when they come back, sometimes you find it is not what you agreed to in the meeting." The language barrier is also daunting. "Sometimes you do not know if they have actually understood what you are saying," Chukweke says. At the Sinopec gas rig, operated jointly with Shell, Zhao's Dutch colleague resorts to having him write notes when he fails to understand Zhao's accent.
But China's outsider status could change fast, judging by what has happened 1,000 miles down the coast from Nigeria, in Angola. There, one of Africa's poorest countries is still reeling from a devastating 27-year civil war that ended four years ago after 1.5 million Angolans had perished. Yet its oil industry is booming. New offshore discoveries made in the 1990s will begin producing within the next few years, potentially transforming Angola into one of Africa's richest nations and making its oil production equal to Nigeria's. Americans currently get 4% of their oil from Angola, much of it from Chevron, whose enclave in northern Angola kept producing throughout the bloodiest war years. But Chevron's dominance is already eroding. In late 2004, while IMF officials berated Angola for its corrupt oil dealings, China gave the government $2 billion in credit to repair railway tracks, which had been bombed repeatedly in the war, and to build new office buildings in the capital--all using Chinese contractors. China's timing was flawless: When French oil company Total applied to renew its license on a large block, Angola refused, handing it instead to Sinopec, with which it then formed a joint venture to bid on other oilfields. China and Angola have also discussed starting flights between Beijing and Luanda, Angola's capital, whose streets are now lit by a Chinese-built power station.
But China's hold on Africa is not as solid as it might seem from the new buildings along Luanda's Atlantic seafront. Equally hungry for new resources, India, South Korea, and Malaysia have also arrived in force in Africa. When Nigeria held its first open auction for new oil blocks last fall, traders packed a large room in Abuja's Sheraton. As the meeting dragged into its second day, executives from India's ONGC Videsh Co. announced that they were buying exploration rights to two huge oil blocks, worth about $432 million. A loud argument erupted as executives from the Korean National Oil Co. insisted they had been promised the blocks by Nigeria's government in exchange for fixing railway lines and building a new shipyard. "It was high drama," says a Western diplomat, who sat through the auction. Three months later the Koreans had not paid their signing bonus, and the staff of Nigeria's Department of Petroleum Resources was trying to figure out what to do with the two contracts. Squatting at a coffee table in his Lagos office, hours before the deadline for payment, department head Chukweke, who worked for years as a Shell geophysicist in London, admits he prefers negotiating with predictable Western oil companies despite the huge influx of Asian money. "Exxon comes in with clear mandates," he says. "We can negotiate within those mandates."
In the end, the oil companies will need more than corporate mandates to succeed in some of the world's most difficult and dangerous terrain. Last September, Nigerian officials jailed the Niger Delta rebel leader Mujahid Dokubo-Asari, whose supporters have for years waged armed attacks on foreign oil facilities. In response, rebels seized Chevron and Shell facilities, shutting down much of their delta production for days. With the prospect of an all- out battle looming, government officials coaxed the rebels into a cease-fire. But the peace has been tenuous at best, and rebels warn that it is likely to collapse entirely if Asari is convicted. "You will see civil disobedience like the world has never before seen," said rebel spokesman Onengiya Erekosima, sitting in his Port Harcourt living room in December.
Two nights later the truce finally fell apart. Nine youths rowed a wooden dugout up a creek near Kula and ordered the locals to run for cover. "They asked us to leave immediately if we loved our lives," one villager told a local newspaper. The group then attacked one of Shell's major pipelines, which runs to the company's Bonny Island terminal, a key loading point for Europe's oil refineries. The blast killed at least eight children and sent plumes of fire and smoke soaring 20 feet into the sky above the swamps. It also shut two Shell wells and cut the company's Nigerian production by about 170,000 barrels a day for several days.
In the words of Zhao, who manages Sinopec's rig in the delta: "Traditions different here." But for China, mastering those traditions might very well be key to its economic growth.
"We haven't been totally invaded by China yet, but it will come," says one official. "I get calls and e-mails daily from Beijing, from people looking to buy oil."
See also additional image(s) in Table of Contents of same issue.
TWO PHOTOS: PHOTOGRAPHS BY ANTONIN KRATOCHVIL--VII CHINESE FOOTPRINTS Engineers on a Sinopec oil rig near Port Harcourt, Nigeria (top), and a replica of the Forbidden City in Lagos. MAP: FORTUNE MAP PHOTO: PIUS UTOMI EKPE--AFP/GETTY IMAGES WAR AND PEACE China's Foreign Minister Li Zhaoxing pays a call on his Nigerian counterpart (top); rebels attack a Shell pipeline in the delta. PHOTO: AUSTIN EKIENDE--REUTERS TWO PHOTOS: PHOTOGRAPHS BY ANTONIN KRATOCHVIL--VII NIGERIA'S TWO FACES A Chinese company is building the biggest hotel in Lagos (top); a boy stands alongside a river polluted with oil.
Document FORTUI0020060206e22k00007
First/The Oil Business