The sleepy tropical island city of Malabo had hardly changed in years. The capital of Equatorial Guinea, a tiny West African nation of fewer than 500,000 people, consisted of little more than some moldering Spanish colonial buildings, a few palm-lined plazas and the tightly packed shanty towns which encircle most African settlements. Its one claim to fame was that novelist Frederick Forsyth lived there while he wrote his military thriller The Dogs of War. But over the past three years, Malabo has been transformed. Office buildings have shot up, hotels and banks have opened, and foreigners — once a novelty in Malabo — now cram the town’s fancy new restaurants. There’s so much construction, joke the locals, that if you open your mouth and stick out your tongue someone is likely to build on it.
The source of this economic boom can be found buried beneath the nearby ocean floor. Over the past decade, foreign oil companies have found at least 500 million barrels of high-grade crude oil in the country’s waters. Production has jumped from just 17,000 barrels per day in 1996 to more than 220,000 and could grow another 50% within three years. The oil boom has fueled fantastic economic growth — 65% last year, down to an estimated 25% this year — and pushed annual per capita GDP from $800 seven years ago to more than $2,000 today. The bonanza in Equatorial Guinea is being repeated across the region. Chad, one of the poorest countries in the world, will soon start pumping more than 200,000 barrels of oil a day through a $3.7 billion, 1,070-km pipeline — Africa’s biggest-ever infrastructure project — that transverses Cameroon.
The island nation of São Tomé and Príncipe, which sits on perhaps 4 billion barrels of crude, is also attracting foreign oilmen. These upstart countries join such established giants as Nigeria, which plans to increase its output from its current 1.9 million barrels per day to more than 3 million; Angola, which wants to double its almost 1 million daily output; and Gabon, which is encouraging more deepwater exploration to prop up declining production. All the action makes the waters off West Africa one of the hottest places for oil exploration in the world. On a global scale, the numbers may seem modest; total proven reserves in the Gulf of Guinea sit at 40 billion barrels, less than one-sixth of Saudi Arabia’s 261 billion. But Africa is just getting started. Says Al Stanton, an Edinburgh-based oil analyst with Deutsche Bank: “The opportunities for expansion are tremendous.”
Driving the oil rush is Washington’s search for reliable oil suppliers outside the Middle East — a search made more urgent in the wake of this month’s terror bombing of an oil tanker off the coast of Yemen. European companies such as TotalFinaElf and Royal Dutch Shell have long been players in the region but leading the new charge are U.S. giants ExxonMobil and Chevron and independents such as New York-based Amerada Hess. American firms have been particularly aggressive in wooing new producing countries like Equatorial Guinea and can tap their experience in deep water drilling in the Gulf of Mexico.
West African oil is low in sulphur, which makes it easy to refine. Because most of it lies offshore, foreign oil companies don’t have to deal with locals beyond a few government officials and hired labor. Transport is easy too: the oil fields sit a direct tanker trip across the Atlantic from Europe or America’s east coast, with no pesky Suez Canal or Gulf to navigate. The Bali blast is a reminder that no place is safe from terror, and recent fighting in Ivory Coast is a symbol of West Africa’s volatility, but oilmen remain bullish in part because oil production is offshore and thus rarely disturbed by onshore unrest. “West Africa may not be particularly stable but it is not as dangerous as the Middle East,” says George Ayittey, head of the African Oil Policy Initiative Group, a division of the Israel-based Institute for Advanced Strategic & Political Studies.
As Africa supplies more of America’s oil needs — one Washington think tank expects Africa’s share of the U.S. market (including oil from North Africa) to grow from 15% today to 25% by 2015 — there has even been Washington gossip, denied by the State Department, that the U.S. will build a military base in São Tomé to protect its growing interests in the region. U.S. officials downplay strategic considerations in the rush to West Africa, despite the note in Vice President Cheney’s recent National Energy Policy report that West Africa is “one of the fastest-growing sources of oil and gas for the American market.” “There’s been all this talk about a strategic dimension that is not really there,” says one U.S. official.
But while West African oil may be good for the U.S., will it be good for West Africa? Oil-company boosters say the impoverished region will make billions of dollars, which it can spend on improving health, education and infrastructure. “There’s incredible opportunity for wealth creation for local people,” says Amerada Hess’s Carl Tursi. But human-rights activists say corrupt governments often pocket most of the money. Case in point: Nigeria, which has exported over $320 billion-worth of high-grade crude over the past 30 years but has little to show for it beyond some decaying freeways and sports stadiums.
One of Nigeria’s last military rulers, General Sani Abacha, whose death in 1998 led to a return to democratic rule, is believed to have stolen more than $4 billion. Just last week a leaked imf report found that $4 billion has disappeared from Angola’s budget over the past five years. In Chad, the government spent $4.5 million of an initial $25 million World Bank payment on arms to prosecute a war against northern secessionists.
Environmentalists worry that massive infrastructure projects like the Chad-Cameroon pipeline will destroy sensitive rain forests. Critics also fear that the oil windfall will help prop up dictators. In Equatorial Guinea, the ruling party and its leader, President Teodoro Obiang Nguema, show no sign of giving up control; opposition members are routinely harassed and tortured, according to Amnesty International. The IMF has cut off several aid programs because of corruption, and has called for good governance and good management of oil resources in Equatorial Guinea, warning that “authorities will need to address the weakness in financial management and governance if the country is to seize its unique opportunity to … achieve broad-based growth and poverty reduction.” Until that happens, the benefits of West Africa’s black gold will continue to elude ordinary people.