Russia Taking On China In Africa

Via Energy Daily, an interesting report on Russia’s renewed interest in African resources.  As the article notes:

Russian President Dmitry Medvedev’s visit this week to Nigeria, sub-Saharan Africa’s biggest oil producer, to sign natural gas deals threw down the gauntlet to energy-hungry China, which has been aggressively sinking its commercial hooks in the mineral-rich continent for the last few years.

Medvedev is the first Russian president ever to visit Africa, underlining the importance Russia attaches to getting its hands on the continent’s minerals — particularly oil and gas — and to bolster its status as a global power.

India, Asia’s other burgeoning economic titan, has also become a player in Africa in recent years, and the mega-deals that are now emerging will shake up Africa’s economies and magnify the prospect of conflicts over resources between rapacious regimes, such as the little-reported decade-old war in the mineral-rich Congo.

Medvedev told reporters after meeting with Nigeria President Umaru Yar’Adua in the federal capital that “the prospects are very good” for Russia’s commercial plans for Africa. Potential Russian investment, he said, could be worth “billions of dollars.”

Alexei Vasilyev, head of the Africa Institute at Moscow’s Russian Academy of Sciences who is traveling with Medvedev, said, “Africa’s oil and gas reserves are rising fast. That’s the region with which we have to cooperate if we are to position ourselves as a great energy power.”

Among the deals signed in Abuja was one involving Russian state-owned gas giant Gazprom to build a 2,580-mile gas trans-Saharan pipeline from Nigeria via Niger and Algeria to southern Europe. Construction of the first 360-mile link is scheduled to start in 2010.

Nigeria, which holds the largest gas reserves in Africa, is the continent’s third-largest producer after Algeria and Egypt.

Gazprom, which is investing $2.5 billion in the Nigerian project, is determined to bolster its position as one of the dominant suppliers for Europe and North America. But domestic production is declining, so the Russians have an added incentive to secure energy sources abroad, wherever they can.

Gazprom officials conceded the Russian giant is lagging behind Western oil majors such as Royal Dutch Shell, Chevron and Exxon Mobil, but is prepared to take them on, including the construction of nuclear power plants.

Russia may also explore for uranium in Nigeria, but exploration is already under way in Namibia, which just happened to be Medvedev’s next stop on his tour that underscores Russia’s strategic drive to push into Africa. So is Angola, another major oil producer in West Africa.

But even as Medvedev was whistle-stopping his way across Africa, the Chinese were not resting on their laurels. The state-owned Sinopec Group agreed to acquire the Addax Petroleum Corp. for $7.19 billion, the largest oversea takeover by a Chinese company.

That gives Beijing access to the burgeoning oil and gas reserves in West Africa and, more problematically, to oil fields in Iraqi Kurdistan.

According to The Wall Street Journal, the Addax deal and other recent purchases in the energy industry by Chinese firms “show that they are gradually growing into international companies, capable of striking high-profile, cross-border deals. They are even expanding into countries such as Syria, deemed too risky by Western oil companies.”

In March, a Chinese consortium signed a $3.2 billion deal with Iran, an ally of Russia, to develop the rich offshore South Pars gas field in the Gulf, which is part of a vast pocket of gas below the seabed that geologists describe as the world’s largest reservoir of natural gas.

The Chinese signed the deal only two days after President Barack Obama renewed U.S. embargoes on Iran imposed in the 1990s.

Another Chinese operator, China Sonangol International Holding Ltd., set up in 2004 to push through Chinese oil projects in Africa, has made major oil acquisitions in Angola.

Sonangol, now also active in other oil-producing zones such as Latin America and Southeast Asia, has diversified into infrastructure projects in Angola, such as highways. It has a close relationship with the national reconstruction program headed by Angola’s powerful security chief, Gen. Helder Viera Dias.

With the Chinese having business buddies like that, the Russians are going to have a tough time muscling into Africa.”

This entry was posted on Friday, June 26th, 2009 at 6:18 am and is filed under China, Gazprom, Nigeria, Russia, Sonangol.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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