Oil pact with China aims to boost falling reserves

Gabon has signed a series of deals with China to try and breathe new life into its declining oil industry. In return, Gabon has agreed to ship to oil-thirsty China a guaranteed supply of 20,000 barrels of crude per day. The agreements, signed during an official visit to Gabon by Chinese President Hu Jintao earlier this week, will see China's state-owned oil company Sinopec appearing on the scene to explore for oil onshore and possibly offshore too. Sinopec will also look at the potential for building a second oil refinery in Gabon. President Omar Bongo hopes that the Chinese, who are increasingly keen to secure oil imports to feed their booming economy, will help fill the gap left by Western oil giants such as TotalFinaElf and Shell, whose own activities in Gabon are shrinking rather than expanding. “They (the Chinese) are as worried about stability in the Middle East as the Americans are,” Nicholas Shaxson, a Berlin-based analyst of Africa's oil industry, remarked. Gabon's problem is that oil exports have shrunk by a third over the past six years as existing reserves have been depleted and no major new fields have been discovered to sustain production. Offshore oil has given the former French colony of 1.2 million people a per capita income that is nine or 10 times higher than the average for Sub-Saharan Africa. It has also helped to keep Bongo in power for 37 years. But acccording to US government statistics, production has declined from a peak of 370,000 barrels per day in 1997 to just 250,000 last year. That mainly reflects a sharp decline in output from Gabon's large Rabi offshore field, whose output has slumped by nearly 100,000 barrels per day over the past four years. Declining oil production has hit government revenues and in turn public spending on road maintenance and social services. Child immunisation programmes have been curtailed and last month secondary school pupils rioted in the capital Libreville in protest at a lack of free school buses - the latest sympton of cutbacks in education. According to the International Monetary Fund (IMF), Gross Domestic Product (GDP) per capita has declined 18 percent with the slump in oil production over the past six years. It is projected to be $4,276 in 2004, but that still compares very well with the average of $475 for Sub-Saharan Africa. Gabon's Minister of Energy and Mines, Richard Onouviet, said Sinopec would initially explore for oil onshore in partnership with French-owned Elf-Gabon, which has traditionally dominated oil production in the country. “Initially three new on-shore blocks have been agreed. However, technicians from Sinopec are continuing their investigations and there is a possibility that an off-shore agreement may be made in the future,” he told IRIN. A senior oil executive in Gabon told IRIN that the deal with China was largely a political gesture, but both sides are desperate for results. Chinese oil imports rose by 31 percent last year and petroleum analysts reckon it will surpass Japan in 2004 to become the world's second biggest oil importer after the United States. Gabon meanwhile is desperate to find more oil to match the recent large discoveries in neighbouring Equatorial Guinea and keep the black gold flowing. “Acreage is seen as mature in Gabon, so the sorts of oil companies that go in there are typically smaller, more nimble operators, with smaller financial capacity and are going there to squeeze a bit more out of existing wells or look for small oil fields,” Shaxson remarked. Although this is Gabon's first oil deal with China, Onouviet pointed out that the two countries have enjoyed "strong relations" for the past 30 years. The influential Chinese business community in Libreville had undoubtedly played a major role in bringing the two governments together. “There is an active Chinese community in Libreville which is close to the president,” explained Jonathon Bearman of Clearwater Research, a London-based economic research group that specialises in Africa.