Courtesy of Africa-Asia Confidential, a detailed look at China’s and India’s strategic business initiatives in Africa.  As the article notes, China’s state companies have been advancing several billion-dollar petroleum and bank deals while India’s plans may be on hold:

“…The Lagos State government, the Nigerian National Petroleum Corporation and the China State Construction Engineering Corporation signed an US$8 billion deal this month for a 300,000 barrel-per-day oil refinery and a liquefied petroleum gas refinery that will produce 500,000 tonnes a year in the Lekki Free Trade Zone. Lagos will provide land and infrastructure for the project; the CSCEC will provide 80% of the finance and the NNPC will raise the rest. This plan, however, worries India’s companies in Nigeria, especially ONGC Mittal Energy (OMEL), the consortium created by New Delhi’s state-owned Oil and Natural Gas Corporation and the Mittal Group (AAC Vol 3 No 2). OMEL had sought assurances of support from the NNPC and the Nigerian government in December last year for its plans to build a refinery in the Lekki Free Trade Zone but the deal has gone awry.

The CSCEC is moving ahead with its $23 bn. project in partnership with the NNPC to build refineries in Lagos, Borno and Bayelsa States (AAC Vol 3 No 7). A memorandum of understanding between the two companies for the deal was signed in May and the timing may be linked to two separate events: Nigeria’s plans for another auction of oil block licences next month and next year’s national elections. The deal resembles the oil-for-infrastructure contracts signed by former President Olusegun Obasanjo just before the 2007 elections, although President Goodluck Jonathan wants to avoid too close an association with his recent predecessors.

Asian interests grew under President Obasanjo (1999-2007), then waned under Umaru Musa Yar’Adua (2007-2010), and are now in the ascendant again. The latest flurry of multibillion-dollar deals involving China’s state firms suggests that Asian risk managers think that President Jonathan will stay on. Abuja keeps a close eye on the Chinese deals, which seem to be motivated more by politics than economics (AAC Vol 2 No 12).

President Jonathan has quietly launched his run for the 2011 presidential elections. His very close ally, Petroleum Minister Diezani Allison-Madueke, is coordinating the campaign and Femi Otedola, the billionaire owner of Zenon, an indigenous oil trading company, has promised funds. Jonathan’s team needs a war chest as the competition at the ruling People’s Democratic Party (PDP) convention in November will be tough. Some of those vying for the presidential nomination hope to win oil licences if they bow out gracefully. Jonathan’s intensive public works programmes and projects in the Niger Delta seem to be part of his electoral strategy.

Bilateral trade balloons

Whatever the short term setbacks, China-Nigeria trade increased by more than 76% in 2009 compared to 2008: Nigeria exported $5.5 bn. (mainly oil) to China and imported $900 mn. (mainly manufactures), according to Beijing. It estimates that cumulative Chinese investment in Nigeria reached $7.2 bn. last year.

OMEL had conducted feasibility studies for the Lekki refinery and had signed with African Petroleum and Oando, which represent local investors in the project. NNPC said that China’s Tianjin Energy Resources, France‘s Total and Italy‘s Eni were interested in joining the consortium. NNPC Group General Manager Levi Ajuonuma said that Lagos State had given OMEL and its partners the commitment that they were seeking but that the project seemed to have been snarled up in the uneasy transition from President Yar’Adua to Jonathan.

The Lagos State government had promised to provide an oil jetty, power, roads and water to the Indian-backed refinery; it is now offering the same to the Chinese investors. At the signing of the CSCEC deal, Lagos Governor Babatunde Fashola said that as Chinese companies were building the Lekki Free Trade Zone, ‘we should be speaking the same language’. That looks bad for the Indian project. Fashola said that Lagos State has begun ‘a small pilot project teaching Nigerian children Mandarin in addition to French language and English’.

The agreement with CSCEC for a refinery at Lekki complicates OMEL’s plans. In December 2009, Oil Advisor Emmanuel Egbogah had told the consortium that it would not be able to continue oil exploration if it did not make progress on its $6 bn. investment in a refinery, railroad and power project. That was a condition of the award of the rights to OPL 285 and OPL 279 blocks in the 2006 bidding round. Yet the finance still has to be arranged for the Chinese deal. This month Billy Agha, NNPC Group Executive Director of Engineering and Technology, said the Chinese companies would have to find competitive financing and that a 25% equity stake would be reserved, probably for one of China’s state-owned banks.

Planned reforms of NNPC, which was declared ‘insolvent’ by Deputy Finance Minister Remi Babalola, have stalled. Now the NNPC may sell some investments in joint ventures with international oil companies to keep the projects on schedule. China is seeking oil barter deals to ease the financing problems. The state-owned China National Offshore Oil Corporation (CNOOC) is bidding, via local company Sunrise, for 29% in one of ExxonMobil’s joint ventures with the NNPC.

Sunrise and CNOOC

Sunrise, owned by Leno Adesanya, is involved in some of the biggest deals signed by China’s state companies. Sunrise was the private face of CNOOC’s improbable $50 bn. bid for 6 bn. barrels of oil in 2009 (AAC Vol 2 No 12) and worked with CSCEC on the $25 bn. MoU. Sunrise has made separate bids worth a total of $4.8 bn. for the 29% stake. It wants to buy part of Exxon’s 40% share and part of the NNPC’s 60%. The joint venture produces 720,000 bpd and has reserves of up to 2 bn. barrels. The government has agreed to sell a 19% stake but wants more than Sunrise’s $3.2 bn. offer. Exxon, however, is unwilling to sell any of its stake. Sunrise is working on similar deals for other government joint ventures with Royal Dutch Shell and Chevron.

Under President Jonathan, Chinese companies have won contracts in the oil, transport, power and finance sectors. In mid-July, Vice-President Namadi Sambo met officials of the China National Machinery and Equipment Import and Export Company (CMEC) and Leda Greenpower Nigeria to negotiate a partnership to explore for coal in Benue, Enugu, Kogi and Nasarawa states.

After the failure of several Chinese oil-for-infrastructure deals, China’s state-owned Sinopec has turned to commercial offers to gain access to Nigerian oil. In June 2009, Sinopec paid $7.2 bn. for Addax, the Swiss-owned oil and gas explorer. Then on 12 July, Sinopec announced that it had struck oil at Addax’s Udele-3 well in Block 137. This represents the first opportunity for a Chinese oil company to operate in the troubled Niger Delta.

Nigeria’s biggest bank, First Bank, is talking to Chinese financial institutions which want to obtain an equity stake in the bank, said Bisi Onasanya, First Bank’s Chief Executive Officer, at the opening of First Bank’s Beijing office on 23 June. First Bank has cooperation agreements with China Construction Bank and China Development Bank. It hopes to sign a similar deal with the Bank of China.

First Bank has already become an important financial conduit in China-Nigeria trade and has signed deals with Guangdong Xinguang International China-Africa Investment Limited, Shenzhen Energy Group and the Yuemei Group textile company.”