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Date: Mon, 03 Oct 2005 06:12:43 -0700
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Subject: Africa: Whose Energy Future?


Africa: Whose Energy Future?

AfricaFocus Bulletin
Oct 3, 2005 (051003)
(Reposted from sources cited below)

Editor's Note

With oil prices rising worldwide, African oil-producing countries
are expecting windfall earnings. Global oil companies and consuming
countries are giving even greater attention to Africa's oil. The
World Petroleum Congress, held last month in Africa for the first
time, in Sandton, South Africa, celebrated the potential. But a new
report from South Africa's groundWork questions the fundamental
structure of the oil industry on the continent.

The new report by the South African environmental group, which has
a long record of research and protests against the environmental
damage from the refining industry in South Africa, goes beyond the
common critique that corruption and bad governance block the
productive use of oil income. Analyzing both "upstream" production
and "downstream" processing on the continent, the report charges
that "the oil industry is providing the context for bad governance
and corruption," in the words of Nnimmo Bassey of Nigeria's
Environmental Rights Action. It also lays out a detailed analysis
of the "value subtracted" by the oil industry -- costs to
communities and society not included in the balance sheets of
company and government accounts.

This AfricaFocus Bulletin contains brief excerpts from the
introduction and chapter 2 of the groundWork Report, focusing on
oil production in Africa and in particular on the negative
"externalities" suffered by affected communities. The full report,
including graphics and references, is available at
http://www.groundwork.org.za

For additional background and links on oil in Africa, see previous
AfricaFocus Bulletins:

Chad: Oil Transparency Loopholes
http://www.africafocus.org/docs05/oil0502.php

USA/Africa: Oil and Transparency
http://www.africafocus.org/docs04/eq0407.php

Africa: World Bank Industry Review
http://www.africafocus.org/docs04/wb0404b.php

Angola: Oil and Accountability
http://www.africafocus.org/docs04/ang0401.php

Africa: Oil and Transparency
http://www.africafocus.org/docs04/oil0401.php

Nigeria: Oil and Violence
http://www.africafocus.org/docs03/nig0312.php

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Whose energy future? Big oil against people in Africa

the groundWork Report 2005

September 2005

groundWork http://www.groundwork.org.za

This year's report goes beyond the borders of South Africa, and
ventures into Africa, examining the ravages of the oil industry and
civil society responses to these environmental injustices.
Much has been written on the environmental and social ills of oil
in Africa. ... ...

An oil-based future is questioned in the concluding sections of the
report. It is not only unsustainable because it is so polluting and
the oil will run out, but because it is an energy future
principally for the elite. Ordinary people living next to oil wells
and oil refineries are most certainly not getting the benefits
promised to mankind . In fact they are the scapegoat for the elite
of mankind, for they not only have to live with the pollution of
oil production processes but they also do not have access to the
very energy for which they are made to sacrifice their health and
wealth.

Chapter 2 is on Africa's 'upstream' industry - extracting the crude
oil. It opens with an overview to locate oil in Africa in the
global scene. It then looks at the making of environmental
injustice all along the crude production chain, focusing on Nigeria
and Chad which are the oldest and the newest Sub-Saharan producers.
Chapter 3 carries on down the petrochemicals production chain to
the 'downstream' industry which is about refining and markets. It
focuses on refining in South Africa and concludes with a brief
discussion of how African markets are being shaped.

*****************

2. Upstream in Africa

Africa's oil rush

The Gulf War has both pushed up the price of oil and reinforced
anxieties about security of access to crude supplies both for
countries and corporations. It has added impetus to Africa's oil
rush but did not initiate it. Corporations have always been anxious
to be in on the next big thing lest they should find themselves
excluded later. This is particularly so as the number and size of
new discoveries globally is falling while demand is rising. The
Gulf of Guinea off west and central Africa is viewed by the oil
industry as the world's premier 'hotspot', soon to become the
leading offshore oil production centre [Gary and Karl 2003: 9]. ...

Security and the cost of crude supplies is also top of the agenda
for consuming countries. The US in particular has stepped up
diplomatic and military activity in the region, edging in on the
regional hegemonies of the former colonial powers of Britain and
France. ...

The international financial institutions - the IMF and the World
Bank - are key actors in support of the northern agenda. The World
Bank itself has a direct financial interest in oil and gas. The
bulk of lending by its private sector financing arm, the
International Finance Corporation (IFC), is for resource extraction
and the IFC makes its best profits from these loans. The Bank also
acts to leverage capital from private financial institutions who
are, of course, concerned with the profits of oil debt. Its
presence as a lender provides political cover. It reassures both
oil and finance corporations that they will get their profits out
from projects in unstable countries. Thus, the financial
arrangements for the Chad-Cameroon pipeline ensure that the
interest owed by these countries is paid before they see the money.

Producing countries, and would-be producers, are no less
enthusiastic. Their economic interest is primarily in oil revenues
as well as balance of payments, although much lip service is also
paid to technology and skills transfer. ...

Most have expanded production to cash in on current high prices
while new exploration concessions have been awarded in almost all
African countries, even where the hopes of finding oil seem slim.
Everyone, it seems, is doing well by the escalation of prices -
except ordinary people in oil producing countries. While the
fabulous wealth of oil is paraded before them, they have been
driven ever deeper into poverty. The very common association of oil
wealth with the impoverishment of people and the failure of
national economies has given rise to the notion of the 'resource
curse'

...

The biggest producer, Nigeria, was also the first producer in
Sub-Saharan Africa....

Nigeria and Gabon were already major producers by the time of the
first oil shock and both joined OPEC in the early 1970s and
established national oil companies as part of their the assertion
of national sovereignty rights. At the time of the second oil shock
in 1979, Nigeria felt confident enough to nationalise BP's holdings
on the grounds that it was breaking the oil embargo against
apartheid South Africa. BP's assets were turned over to the
Nigerian National Petroleum Company (NNPC), giving it a 50% holding
in the Nigerian industry. Both countries also learnt to drive
better bargains with the corporations and, in formal terms, ...

Nigeria was racking up debts on the security of oil during the
1970s. It was thus exposed to the debt trap when commodity prices
collapsed in the 1980s and it was one of the first OPEC nations to
break ranks on oil prices as the northern powers reasserted their
grip on producers. ...

These global scale manipulations were replicated in the activities
of oil corporations at the national scale. The best evidence for
this came to light in a French trial which resulted in the
conviction of 30 senior Elf executives in 2003 for defrauding the
corporation. Elf was the largest corporate producer in Sub-Saharan
Africa with a dominant position in the Francophone countries and
major interests in Nigeria and Angola. ...

The 'Elf system' revealed at the trial is described in detail by
Global Witness [2004]. It involved the systematic corruption of
African leaders through a variety of kick-backs, under-invoicing on
crude bought from Elf's subsidiaries to skim the revenues owed to
African countries, and the peddling of oil backed debts with the
specific intention of creating a perpetual dependency on Elf. The
debt system was purposely obscure so that Africans were only aware
of the official lending bank [20] while Elf itself profited from
the debt. It also profited from facilitating arms deals financed by
the debt. ...

Elf's activities in Nigeria during the 1990s are also under
investigation. But it is certainly not the only corporation to have
instigated corruption. The French investigations have in turn led
to investigations into allegations that US corporation Halliburton
was implicated in bribery in Nigeria. Allegations of corrupt
dealing, price manipulation, political string pulling, and
complicity with state brutality have also haunted Shell's
operations in Nigeria.

Working for the Americans

While Chevron has been active in Africa for some time, the US
corporations are prominent in the new oil fields - off-shore of
Nigeria as well as in the new petro-states. Nigeria's take of oil
revenues contrasts with the very poor deals done by late comers.
Equatorial Guinea gets 10 to 20% and Chad only 10%. ... The oil
project in Chad, however, would not have gone ahead but for World
Bank participation because of the level 'political risk'. Chad
initially negotiated its deal in 1988 and subsequently tried to
revise it in 2004. Despite approximately $1.6 million in World
Bank-financed legal assistance, the Chadian government was able to
negotiate only a marginally better deal in the new convention [Gary
and Reisch 2005: 39]. ...

The World Bank justified its participation in the project on the
grounds that there was no other developmental option in Chad, that
its participation would ensure that Chad would escape the 'resource
curse' and the project would thus contribute to poverty
alleviation, and that poor Chadians need access to modern energy.
Critics argued that Chad's governance and human rights record made
it a dead ringer for the resource curse and that a project focused
entirely on exports was scarcely conceived to access energy for
poor people. Thus far, the experience of the project confirms the
critics' view ...

Producing environmental injustice

The industry likes to talk of the production chain as a value
chain. The 'value added' at each link in the chain includes
salaries and wages, taxes and other payments to governments, debt
repayments and interest and, finally, what is taken as profits by
the corporations and either paid out to shareholders or reinvested.
It excludes the costs of raw materials and services provided by
other businesses. Value added is thus the difference in value
between what comes in and what goes out.

The notion of value added serves a vital ideological function. It
proclaims that what it counts as value amounts to a general social
good. And this proclamation is then turned into an assumption.
Thus, a country's Gross National Product (GNP) is, put simply, the
aggregate of value added from all economic activity. The basic
assumption of mainstream economic thought is that the growth of GNP
is in everybody's best interests even if some people benefit more
than others. ...

Yet value added conceals more than it reveals. The calculation of
value excludes major costs which are also produced at each link in
the chain and imposed on other people, on society in general or on
the environment. These costs could be called 'value subtracted'
although they are more conventionally known as 'externalities'.
Those who pay these costs - those from whom this value is
subtracted - are those who are made poor by the process of wealth
creation. ...

Enclosure

Enclosure involves the appropriation of a common resource and the
dispossession of those who previous had rights to the resource.

Nigeria's Land Use Act, promulgated in 1978 by the then military
regime under President Obasanjo, gives the state control of all
land and allows it to evict people where land is required in the
'over-riding public interest'. The public interest specifically
includes the requirement of the land for mining purposes or oil
pipelines or for any purpose connected therewith" [quoted in HRW
1999:59]. The Petroleum Act makes oil and natural gas the property
of the federal state. It provides for compensation for loss of use
but any rent on the land goes to the state.

The practical effect of these two acts is that oil corporations can
and do take what they want from the people within their areas of
operation. The corporations themselves call this the 'land take'.
They also decide what they will pay in compensation. The land take
is enforced by the state security forces. ...

The elite of the Mobile Police are deployed within the oil
installations and paid by the corporations themselves at well above
normal rates. They are commonly known as the 'Shell police' or the
'Chevron police' etc. On at least one occasion Shell made a deal to
supply arms to security forces. It denied doing so until confronted
with evidence and then claimed that the deal had fallen through.
Various gangs recruited from the ranks of unemployed youth and
armed with anything from machetes to sub-machine guns have also
been deployed to intimidate and terrorise people.

This is the pattern for the oil industry throughout Africa: the
corporations are given the right to take what they want while all
rents, royalties and other monies received in exchange for this
right are taken by the state. Consultation with communities in Chad
is touted by the World Bank as a model of best practice.
Consultation, however, comes after the negotiation between the
state and the corporations has already expunged people's rights in
land and made them over to the corporations. That the oil project
will go ahead and that the land required by the project will be
appropriated is not up for negotiation in the course of
consultation. Even the parameters of compensation are pre-defined.
What is left to consultation amounts to little more than a public
relations exercise.

Externalisation

Externalisation is about excluding the costs of pollution from the
value chain so that these costs do not appear in the market price
of the commodity. Externalised costs are thus made to constitute
free benefits to the corporate producer. They are an unacknowledged
subsidy. But these costs do not in fact disappear Rather, they are
imposed on others: they reappear as uncompensated costs to
communities and workers who suffer the loss of resources and health
damaged by pollution and other forms of environmental degradation.

In the Niger Delta, externalisation is an extension of
dispossession as polluted water sources, fields and fisheries are
simply lost to their owners. But the effects are not restricted to
this. The health impacts of air pollution spread across a wide
area, and all who rely on locally produced food - whether from
their own production or bought at market - risk contamination. At
the global scale, the emissions of carbon dioxide and methane from
Nigeria's flares make a substantial contribution to climate change
and the costs will, again, fall heaviest on the poor.

Nigeria does have environmental laws that should notionally ensure
that these costs are internalised - that they are actually paid by
the corporations. The state does not, however, have the capacity or
the inclination to enforce the law. This contrasts starkly with the
political will and resources devoted to enforcing dispossession.
Consequently, corporations have been almost entirely
self-regulating in respect of their environmental practices in
Nigeria and have externalised costs without inhibition. This began
to change in the 1990s when the actions of local people's movements
combined with international civil society organisations to expose
corporate practices. The corporations, notably Shell, perceived
this primarily as a public relations disaster and responded mostly
with PR 'spin'. Such caution as they now exercise is proportional
to the national, and particularly the international, visibility of
their practice.

Chad is Africa's newest oil state and the externalised costs to
date have been mainly those associated with exploration, drilling
and construction. It has also been subject to unusual scrutiny as
the political price that the World Bank paid for insisting that
here it would demonstrate how oil extraction can contribute to
alleviating poverty - even against the odds. The oil started to
flow in 2003 and the flares are burning above the villages of
southern Chad. The impacts will be felt in time and will most
likely escalate over time. They will be mitigated only in so far as
it is possible for local and international civil society to
maintain present levels of scrutiny.

Exclusion

Exclusion relates to decision-making power in the market and in
society. Given the weight of economic forces in shaping broader
social institutions and relations, these two aspects of exclusion
frequently reinforce each other. The institutions of the market are
specifically designed to remove decision making from the public
sphere and so exclude all who do not have an interest in profit.
Thus, those who are dispossessed or who carry the externalised
costs of production are prevented from contesting the theft or
contamination of their resources.

Niger Delta communities have a long history of resisting the
enclosure of their land. The Movement for the Survival of the
Ogoni People (MOSOP) became the best known organisation of
resistance and an inspiration for communities across the Delta. In
1993, it organised mass protests throughout Ogoniland and forced
Shell to close down its Ogoni production wells although active
pipelines still cross the territory.

Resistance was met with brutal repression. It started with security
force attacks thinly disguised as inter-ethnic violence. At the
same time, Shell was trying to buy off MOSOP leaders. Then, in
1994, four 'moderate' Ogoni chiefs were murdered at Giokoo. The
circumstances indicate that they were killed by security operatives
acting under cover. Prominent MOSOP leaders were immediately
accused of the murders and arrested - without allowing time even
for the pretence of an investigation. In 1995, Ken Saro-Wiwa and
eight others were executed on the order of a rigged court. ...

The use of brutal security force violence did not begin or end in
Ogoni. From the early 1990s protest across the Delta became more
organised and numerous ethnic groups adopted charters loosely
modelled on the Ogoni Bill of Rights. They commonly claimed the
right to control land and natural resources, including oil, and
demanded a meaningful political voice within a restructured
Nigerian federation. ...

The savagery of the security force response also intensified
throughout the decade. Ijaw youth greeted the new year of 1999 by
mobilising in support of the Ijaw Youth Council's Kaiama
Declaration [see Box 11]. In response, security forces killed over
100 people and burned down ten or twenty homes. In many similar
incidents around the Delta, corporate helicopters and boats were
seen carrying security forces. The corporations routinely deny
involvement. However, new evidence brought to light in preparation
for a court case against Chevron indicates that soldiers not only
used Chevron's helicopters in a 1999 attack on the villages of Opia
and Ikenyan, but that Chevron paid them for the operation.

The death of military dictator Sani Abacha in 1998 opened the way
to a restoration of civilian rule and the election of Olusegun
Obasanjo, himself a former military ruler, as president. The
occupation of Ogoni was lifted but the Delta is still saturated
with security forces and abuse of people is routine. On the other
side, people have occupied oil facilities and forced temporary
shut-downs across the Delta. In 2002, several hundred women
occupied ChevronTexaco's Escravos terminal in Delta State for 10
days, one example of the growing assertiveness of women in
resistance.

In this period, gun trafficking in the Delta has escalated and
armed youth groups, sometimes known as 'cults' or 'area boys', have
emerged. Mostly, it appears that they have been armed by
politicians to intimidate opposition party supporters, by local
elites to secure their control over oil sub-contracts and pay-offs
against rival factions, or through 'illegal bunkering' networks
responsible fo r the wholesale theft of oil. Cult leaders have also
been used to infiltrate and subvert resistance movements. ...

Chad's president, Idriss Deby, took power when his rebel troops
captured the capital N'Djamena in 1990 but subsequently gave his
regime a veneer of democratic legitimacy through rigged elections.
Friends of the Earth report that, In 1997 and 1998, hundreds of
civilians were massacred in the project area by national troops,
for the sake of 'pacifying' the region to make way for oil
development" [Nguiffo and Breitkopf 2001: 8]. Community
consultations were conducted in the presence of security forces at
least until 1997" and thereafter in the presence of government
officials [Djiraibe and Horta 2004].

Chad ranks at the bottom of international league tables on most
indicators of good governance including corruption and 'voice and
accountability'. Government officials are increasingly appointed
from a narrow clique around the president and arbitrary arrests,
torture and summary executions by security forces are routine.
Independent radio stations are regularly closed down and
journalists arrested in response to critical broadcasts. In 2003,
a station run by local human rights groups was closed down less
than two weeks after international VIPs had been in the country for
the October 2003 pipeline inauguration" [Gary and Reisch 2005: 21].

These then are the means by which the value subtraction chain is
made to work. Below, we look at each link in the upstream chain,
focusing on Nigeria, Africa's oldest oil state, and Chad, the
newest oil state. This is not a complete description. A detailed
documentation of every incident of abuse would be a very long book
indeed. Rather, our intention is to show the oil industry at work
and the stories told here are only a very small selection of the
stories that could be told.

*************************************************************
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.

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