The Corporate Council on Africa reports on the increasing strategic importance of African oil to the US

West Africa stands on the brink of an unprecedented oil boom as global oil corporations pour billions of dollars into offshore and natural gas developments, reaping the benefits of the world's last large unexplored energy frontier. The region offers what is potentially the next major economic growth point in the world, based on strategic energy supplies and other natural resources. West Africa's geographic location is accessible by world markets; the region offers relatively low labor and infrastructure costs; and, most significantly, the prospect of relative strategic stability.

The US is spearheading the rush for African energy supplies. Already, West Africa supplies close to 15 per cent of US petroleum, roughly the same quantity it receives from Saudi Arabia. Nigeria, whose oil production is 2.25 million bpd, has now begun to develop its natural gas resources as well. Nigeria is capable of more than doubling its GDP from energy exports over the next five years, excluding any new reserve discoveries.

African oil production sky rockets
Angola, a country whose oil production has skyrocketed in recent years, plans to double production from 900,000 bpd, to 1.8 million by 2007. Given their tremendous resources, Nigeria and Angola are the top two energy-producing states in West Africa, but they represent only the initial thrust of the energy boom in the region.

Over the past decade, foreign oil companies have found at least 500 million barrels of high-grade crude oil in Equatorial Guinea's waters. Production there has jumped from 17,000 bpd in 1996 to more than 220,000 bpd currently, and may reach over 700,000 barrels by 2020.

The expansion in Equatorial Guinea is being repeated across the region. Chad, will soon start pumping more than 220,000 bpd through a 1,000 km long pipeline. This pipeline is the largest infrastructure project to be

undertaken in Africa to date. The project will cost over US$ 3.5 billion.

The island archipelago of Sao Tome and Principe is another key area, sitting on between two and four billion barrels of crude oil. It will begin selling offshore concession areas to oil majors in an area known as the "Joint Development Zone," currently under development in conjunction with Nigeria.

AGOA takes effect
With the passage of the African Growth and Opportunity Act (AGOA) in 2000, African companies now have a competitive advantage doing business with the US. From US Department of Commerce data, AGOA trade between the US and Africa last year was US$ 9 billion, an increase of 10 per cent from the year before. This figure includes AGOA-eligible countries under both the pre-existing US Generalized System of Preferences (GSP) and the expanded AGOA GSP, plus textile and apparel imported duty-free and quota-free under AGOA provisions. With provisions allowing for petroleum products exported to the US from lesser-developed countries, Angola was the leading GSP beneficiary in the world for the second consecutive year, with US$ 2.7 billion in benefits, an increase of 3.5 per cent from 2001.

This provision also allowed Equatorial Guinea to be thirteenth for GSP benefits. South Africa was the world's eighth GSP beneficiary with US$ 552.9 million in benefits, a 9.2 per cent increase from 2001. Angola, South Africa and Equatorial Guinea accounted for 94 per cent of total GSP use in sub-Saharan Africa.

Angolan President Dos Santos addresses CCA delegates

Sub-Saharan Africa's total merchandise imports climbed 6 per cent in 2001 to US$ 87.7 billion and its total merchandise exports were US$ 86.2 billion.

Hot reserves
All this action makes the waters of 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 47 million barrels, only one sixth of Saudi Arabia's 261 billion barrels of reserves. But Africa is just getting started. For several decades yet, Africa will enjoy the phenomenon known as "reserve creep", during which the discovery of additional oil reserves will continually increase the current reserve figures. In 2001, 7 billion of an estimated 8 billion barrels of oil discovered worldwide were located off the coast of Africa.

The US business community has found that even outside the oil and gas sector Africa has opportunities for growth. Two-way trade between the US and Africa is at US$ 24 billion, making the US Africa's largest single country market, purchasing 26 per cent of the region's exports in 2001. In 2002, US exports to sub-Saharan Africa were 46 per cent greater than those to the former Soviet Union republics, and nearly twice those to Eastern Europe. US exports to South Africa alone were larger than our sales to Russia, whose population is more than 3.5 times as large.

Africa matters to the US.
The Corporate Council on Africa (CCA) is a non-profit, membership organization of over 160 US companies dedicated to the African marketplace. It's the leading US organization dedicated to enhancing trade and investment ties between the US and the 53 nations of Africa. The American companies that make up the CCA represent nearly 85 per cent of all US private sector investment in Africa.