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China-Africa and an Economic Transformation$

Arkebe Oqubay and Justin Yifu Lin

Print publication date: 2019

Print ISBN-13: 9780198830504

Published to Oxford Scholarship Online: June 2019

DOI: 10.1093/oso/9780198830504.001.0001

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The Changing Dynamics of Chinese Oil and Gas Engagements in Africa

The Changing Dynamics of Chinese Oil and Gas Engagements in Africa

Chapter:
(p.173) Chapter 9 The Changing Dynamics of Chinese Oil and Gas Engagements in Africa
Source:
China-Africa and an Economic Transformation
Author(s):

Cyril Obi

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198830504.003.0009

Abstract and Keywords

This chapter examines the changing patterns of Chinese state oil corporations’ engagements with African petro-states through investments in the upstream and downstream oil and gas sectors, and their potential for Africa’s development within the context of evolving China–Africa relations. It conceptually frames such relations, analyzes the contextual shifts and interests involved, and cautions against rather alarmist or biased readings of China–Africa relations that neglect or gloss over the ‘facts on the ground’ and specificities. It also unpacks the notion of African agency in the context of Africa–China economic relations, particularly in the ways Chinese state oil corporations operating in Africa’s oilfields—traditionally dominated by Western oil multinationals—have been exposed to opportunities, risks, structural challenges, and regulation by African petro-states. This provides a sound basis for understanding how lessons learnt and experiences on both sides define the place of China–Africa oil engagements as a key element for potential economic transformation.

Keywords:   China–Africa, oil, corporations, transformation, Nigeria, Angola, South Sudan

9.1 Introduction

Although Chinese state oil corporations (SOCs), most of which had their roots in the 1980s and 1990s, have gained a foothold in the African oil and gas sector, they are latecomers to globally integrated oil and gas operations. The history of the oil and gas industry in Africa has been largely dominated by investments by Western oil multinational corporations (OMNCs). The entry of Chinese SOCs—China Petroleum and Chemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC), and China National Petroleum Corporation (CNPC/PetroChina)—into Africa’s oil fields in the late 1990s has therefore raised serious questions, both about the drivers of China’s search for oil in Africa, the tactics of, and structural challenges facing Chinese SOC investments in the oil and gas sector on the continent, and the implications of their investments both for the corporations and for the development of African petro-states.

In a context where Africa accounts for an estimated 22 per cent of China’s oil imports, its second-largest source of oil supplies after the Middle East (Obi, 2010: 181–2), and China has surpassed the United States as Africa’s largest trading partner (based mostly on oil trade and investments), the place of oil in China–Africa relations cannot be overlooked (Zhenxing, 2013). The analysis of the changing dynamics of China’s oil engagements in Africa is framed within the broader narratives of Sino-African relations and its implications for the continent’s development.

Table 9.1 shows China’s oil imports from various African oil exporting countries in percentage terms. It identifies the main providers of China’s African oil supplies, and the export receipts that accrue from the oil trade (p.174) (p.175) with the continent. The trends in Chinese oil engagements with African petro-states, particularly the countries shown in the table, reveal some of the changing dynamics in Africa–China oil trade. In this regard, Angola, Republic of Congo, Sudan, Equatorial Guinea, and Nigeria can be considered as accounting for the bulk of China’s African oil imports. It would appear that Chinese SOCs have sought investments in those countries, but the extent to which these trends are the result of China’s strategic energy security calculations, or corporate profit interests, remains unclear.

Table 9.1. Value of China’s crude oil imports from African countries (in percentage terms)

Name of Country

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Angola

16

17

16

17

12

15

14

13

12

12

Republic of the Congo

3.3

2.6

1.9

2.1

2.1

1.9

2.4

2.2

1.7

1.9

Sudan

5.2

5.9

6.6

N/A

4.1

0.64

0.87

0.6

2.4

0.3

South Africa

1.7

0.083

0.17

N/A

N/A

0.17

N/A

N/A

0.11

0.075

Equatorial Guinea

2

1.6

1.1

0.37

0.71

0.75

0.87

1.1

0.64

0.32

Libya

1.7

1.7

3.8

3

1

2.8

0.91

0.31

0.7

0.3

Nigeria

0.66

0.2

0.78

0.62

0.41

0.41

0.45

0.67

0.22

0.25

Gabon

0.49

0.65

0.11

0.18

0.064

0.12

0.17

0.5

0.45

0.92

Chad

0.096

N/A

0.066

0.38

0.12

0.088

0.044

0.045

0.065

0.099

Egypt

0.044

N/A

N/A

N/A

0.4

0.28

0.43

0.28

0.44

0.25

South Sudan

N/A

N/A

N/A

N/A

N/A

0.23

1.1

1.9

N/A

1.3

DRC

N/A

N/A

N/A

N/A

0.15

0.32

N/A

0.34

0.042

0.092

Ghana

N/A

N/A

N/A

N/A

0.061

0.18

0.14

0.29

0.71

0.79

Cameroon

N/A

0.25

0.27

0.15

0.18

0.21

0.4

0.22

0.29

0.12

Algeria

1.4

0.33

1.1

0.97

1.1

1.3

0.74

0.23

0.097

N/A

Mauritania

N/A

N/A

0.2

0.061

0.1

0.09

0.047

N/A

N/A

Source: Compiled from various sources by Kelly Mu https://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/chn/show/2709/2008/

Many commentators on the implications of China’s expanding relations with African petro-states operate within a larger narrative based on opposing views (Cheru and Obi, 2011: 91–110; Zhao, 2014; Zondi, 2017). The first frames China as a natural partner that will catalyze Afro-centric development in the context of South–South solidarity (Wenping, 2007: 23–40), and help put an end to Western domination of the continent (Campbell, 2008: 89–105), while the second is rather suspicious and critical of what is perceived as China’s intention to exploit and dominate Africa (French, 2014; Maasho, 2018; Sanusi, 2013; Tiffen, 2014). Cheru aptly captures the various contending perspectives on the impact of emerging global powers such as China on Africa’s development as ranging from the ‘alarmists, the critics of “new imperialism”, to the pragmatic cheerleaders’ (Cheru, 2016). He describes the alarmists as those that see China’s growing engagement with Africa through the lens of threats to the United States and its Western allies, and to national security (Pillsbury, 2015), and the sceptics as including ‘aid bureaucrats’ that are wary of ‘new donors whose practices fragment and undermine aid, including OECD/DAC best practices of aid effectiveness’.

In his view, the critics of the ‘new imperialism’ are of the view that emerging powers like China mainly seek to extract Africa’s vast natural resources while cozying up to the continent’s corrupt and despotic leaders within the context of an East–West scramble for Africa’s resources and markets. The ‘pragmatic cheerleaders’ are described as those who see the engagement of Southern powers with Africa more as an opportunity, and less as a threat, with the opportunity being defined in relation to the expansion of the ‘policy space’ to enable the continent to pursue alternative developmental models (Cheru, 2016). He then makes a case for transcending the preceding perspectives, agreeing with Mohan and Lampert’s (2013) position on the primacy of ‘African agency’, rooted in the nature of the state, and the roles of leadership and institutions in influencing the impact of the continent’s engagement with external and emerging powers.

Four caveats need to be observed when seeking to explain the nature and ramifications of China–Africa relations. The first is to avoid any hasty conclusions on the basis of so-called ‘facts’ about Chinese domination of Africa, but to actually interrogate them—whether they are generalizations based on a few (p.176) examples or cases, or data that do not capture certain realities. Second is to pay attention to changes and responses that may have taken place over time, either in response to contextual shifts, or due to lessons learnt. Third is to pay attention to the diverse, sometimes competing or contradictory interests embedded within China and Africa, and not confuse the trees for the forest.

While it may be easier to assume the image of an undifferentiated China or Africa, it is useful to always note that several sets of ‘Chinese’ actors engage with Africa, which in itself in made up of fifty-four states, each with different histories, capacities, and interests. This suggests that Sino-African relations or engagements cannot be uniform across the board or yield the same results/outcomes. Fourth, and related to the preceding point, is the need to pay close attention to the ‘increasing fragmentation, decentralization and internationalization of states’, including China, where ‘many agencies, regulatory bodies and subnational units have developed their own international policies and relationships’ (Hameiri and Jones, 2016: 73).

It is important to be reminded of a related point made by Hameiri and Jones about (2016: 74) ‘how disaggregated state apparatuses and quasi-independent, market-facing actors are increasingly acting overseas in ways not effectively coordinated in Beijing’. What this suggests is that there are subtle differences in how Chinese SOCs act in Africa, depending on a set of factors, including the level of the state (provincial/regional or national) or economic sector (oil and gas) that they are affiliated to, or their relationship to the ruling party/government. The point is that Chinese behaviour may not be driven by a ‘grand strategy’, but rather reflects a mix of ‘commercial considerations that are often fragmented and incoherent’ (Hameiri and Jones, 2016: 86). Also the point has been made elsewhere about some of the limitations of Chinese SOCs in the highly competitive international oil sector largely dominated by American and European oil multinationals (Patey, 2017: 759). It is equally important to recognize the importance of Africa’s agency vis-à-vis its relations with China (Corkin, 2015: 171).

This chapter explores the changing dynamics of China’s engagements with some of the African oil-producing and exporting countries. It intervenes in debates about the nature and implications of the investments by Chinese SOCs in the oil sectors of established and new African oil producers such as Nigeria, Angola, Equatorial Guinea, Sudan, Chad, Gabon, and Ghana. It interrogates some of the claims about the impact of the Chinese SOCs on development in oil-rich African states, by arguing that engagements and relations respond to, and are shaped by, global and national contextual factors, and lessons learnt on both sides, including the actions/agency of ruling elites in African petro-states. Patey (2014: 4–5) goes further to demonstrate how African petro-states, particularly Sudan, shaped China’s oil investments on the continent and beyond.

(p.177) In exploring the changing dynamics of Chinese oil engagements with Africa, the first section of this chapter provides an overview of the issues, while the second involves a conceptual framing of the China–oil–Africa nexus, including how it can facilitate a better reading of the nature and impact of oil, which is of immense strategic and economic value to Africa’s development. The third section provides an analysis of the changing dynamics and impact of Chinese SOC engagements with select African petro-states. In the fourth and concluding section, the chapter sums up the arguments and examines the prospects for African development on the basis of a nuanced and more balanced reading of the evolving China–Africa oil nexus.

9.2 A Conceptual Framing of China–Africa Oil Relations

Studies of relations between China and Africa have often been framed in historical, structural, economic, and political terms. In most cases, relations have been explained in terms of inter-state relations, sometimes from opposing perspectives of dependency/neocolonialism, or the rhetoric of ‘win–win’ development. This state-centric approach to China–Africa relations is undermined by a dichotomy of views. Those critical of investments by Chinese SOCs argue that unlike Western oil MNCs that possess sophisticated technology and management skills, and are guided by the principles of transparency, human rights, and environmental best practices, including corporate social responsibility, the Chinese SOCs are out to dominate and plunder Africa’s oil and gas resources. They also argue that Chinese SOCs back African petro-states/leaders that unleash violence on their people to pave the way for oil exploitation, and refer to the adoption of sub-standard environmental and labour practices by Chinese oil companies as neo-imperialism or a new form of colonialism of the continent.

Such analyses also seek to implicate Chinese SOCs into the perpetration of the so-called African oil curse—constructed on the view that oil wealth paradoxically fuels corruption and violent conflict, and subverts development (Obi, 2013). The debate on the oil curse has been discussed elsewhere and will not be repeated here. It suffices to note that the notion of the oil curse has been critiqued and found wanting both in terms of its empirical basis and analytical value which renders it unhelpful in understanding China–Africa oil relations. Such narrow deterministic perspectives also serve to reinforce concerns that growing Chinese SOC investments pose a threat to Western strategic and economic interests in Africa—which represents the last frontier in the global oil and gas sector.

On the other hand, the ‘win–win’ school of thought argues that Chinese SOCs represent a better alternative to the Western oil MNCs that have dominated (p.178) and plundered Africa’s oil and gas sectors, leading to the impoverishment and pollution of oil-producing communities. They see Chinese SOCs backed by the Chinese state as representing an opportunity for investments in oil infrastructure, transfer of skills and technology, and new oil revenues capable of catalyzing national economic growth. As will be later shown, the changing dynamics of Chinese investments in Africa’s oil and gas sector demand a more nuanced approach that exposes the limitations of existing claims about what Chinese NOC investments mean for China’s engagements with African petro-states. It is in this regard that we shift attention to an alternate conceptual framing that opens up the space for a more flexible reading of the changing dynamics of China–Africa engagements.

This alternate conceptual approach focuses on the agency of state and non-state actors in the context of China–Africa relations (Mohan and Lampert, 2013: 92–3; Cheru, 2016; Corkin, 2015: 163–72). This is useful both in explaining the nature of, and drivers of, changes in relations as well as challenging the view that China is the dominant partner, while Africa is subservient or weak. Increasing empirical evidence is being produced to show that far from being caught in a neocolonial relationship with, or powerless in the face of, China’s economic might, some African states have been able to turn the opportunities and resources provided by Chinese engagement to their own advantage. Corkin (2015: 171) argues that ‘African agency should be the key tenet in analyzing Africa’s international relations’.

What flows logically from the foregoing is the need to go beyond a stylized reading of relations as inter-state engagement (where states are assumed to be coherent, undifferentiated entities), or as Mohan and Lampert (2013: 94) note, with reference to the works of Carmody and Taylor (2010: 497), transcend the ‘tendency to acknowledge African agency but then focus on the flexibility of the Chinese’ or ‘flexigemony’, whereby Chinese actors ‘adapt their strategies to suit the particular histories and geographies of the African states with which they engage’. They underline China’s capacity to flexibly engage, largely based on ‘soft power’ and respond to the realities within diverse African countries. Such state-centric analyses also bring to the fore the role of domestic elites in shaping state behaviour, echoing some of the views and aspirations of Chinese and African state elites. While knowledge of Chinese elite perceptions of Africa is rather sketchy, some African state elites seem to have developed a fairly good grasp of how engagement with China can advance their class and national interests. The Chinese are also learning how to flexibly and pragmatically respond to the opportunities and challenges that come with their engagements with African countries.

Another relevant issue is the interplay between state and elite agency. Either way, issues of motivation, context, and roles shape relations and matters in terms of ‘who gets what, when and how’. In a critique of Wight’s perspective (p.179) to state agency, Mohan and Lampert (2013: 96–7) point to the heterogeneous nature of Chinese capital in Africa, and the ways in which class interests are embedded in social and political agency. They note the importance of transcending inter-state relations, bringing in the role of non-state actors, and fractions of capital, including how various levels and ‘textures’ of state feature in the emerging relations. Given the attention to the agency of African states and elites, this chapter recognizes the need to go beyond assumptions that present China as taking advantage of passive or pliant African states. The challenge is identified as seeking empirical support for African agency to show that the relations are more complex, and contingent on the interaction between a diverse set of interests on both sides.

The foregoing facilitates the interrogation of the emerging relationship between China and Africa’s petro-states. Most of the earlier analysis on this subject has either been framed in the context of an East–West scramble for Africa’s oil, and its attendant political, strategic, economic, and environmental risks, or the contribution of China to the ‘African oil curse’ (Cheru and Obi, 2011; Obi, 2010; Taylor, 2014). A lot has been made of the entry of the Chinese SOCs from an emergent and energy-hungry Asian power into Africa’s established and new oil states, and the effects of Chinese petro-dollars and resource diplomacy on these countries. This has also provoked debates around a set of questions such as: in which ways are Chinese SOCs different from the Western multinationals that have dominated the oil industry in Africa over the past six decades, without much to show in terms of development in the oil-endowed countries of the continent? What factors influence relations between the Chinese state and African petro-states? What is the relationship between the Chinese state and Chinese SOCs and how is this reflected in engagements with African petro-states and oil regulatory agencies? Do Chinese SOCs represent an alternate oil-based developmental model (to Western MNCs), to African petro-states?

A focus on the agency of African petro-states and elites vis-à-vis relations with China is more likely to move the debate in a different and more productive direction. Apart from enabling a critical engagement with some of the questions raised in the foregoing paragraph, it also offers a framework for analyzing some of the empirical evidence emerging from African petro-states where Chinese SOCs have made inroads, or suffered losses in relation to oil investments on the continent. Although China still remains a largely marginal player based on the size of its investments both in Africa’s and global oilfields, its role on the continent and the impact of the political economy of oil can no longer be ignored. Oil remains an important aspect of China–Africa relations, and a point from which to glean how African agency plays out and helps us transcend rather limited perspectives to the diverse dynamics, possibilities, and outcomes that such may portend for Africa’s development.

(p.180) 9.3 Chinese SOCs and African Petro-States: Evidence from Three Cases

Chinese SOCs are the new kids on the block in the global oil industry. Within the space of two decades, two Chinese SOCs, Sinopec and PetroChina, are now among the world’s top ten oil companies with estimated market values of US$89.9 billion and US$203.8 billion (Coleman, 2017; Poole, 2018). Although, the rather ‘peaceful rise’ of Chinese SOCs in the global oil market is yet to attract much attention; it is significant in three regards. First is how Chinese SOC oil investments and trade in Africa may have contributed to their growing global profiles, and second, how skills, experiences, investments, and managing risks in African oil fields informed SOC’s global oil policies and operations. Third, Chinese SOCs are increasingly becoming formidable as global oil actors vis-à-vis the African petro-states.

It is against this background that Chinese SOCs should be seen as recent entrants into Africa’s oil fields, long the preserve of Western oil MNCs, state oil corporations, and independents. Africa has emerged as the second-largest source of Chinese oil imports (the largest source being the Middle East), accounting for 1.3 million barrels of oil per day or 22 to 23 per cent (Alessi and Xu, 2015). While Africa increasingly features prominently in Beijing’s global energy security calculations, care should be taken not to limit the role of Chinese SOCs to national energy security alone, but to factor in their emergence as global energy corporations seeking to maximize returns from oil investments like their Western oil MNC counterparts.

As suggested in Section 9.2, early studies of the relationship between Chinese SOCs (often presented as agents of the Chinese state) and African petro-states were usually framed either as being asymmetrical and exploitative of, or beneficial to, Africans. Accounts abound of how Chinese SOCs were backing the Sudanese government accused of violating human rights in Darfur, deploying scorched-earth tactics to clear villagers out of their lands preparatory to oil exploration activities, and backing corrupt governments in oil-rich Angola and Equatorial Guinea. The narrative of an energy-hungry Asian giant using resource diplomacy to corner Africa’s oil reserves, offering sweetened oil deals and loans for infrastructure development aid packages, or turning a blind eye to corruption or human rights violations under the guise of its policy of ‘non-interference’ is gradually giving way to more nuanced analysis. This new approach is on the basis of increased acknowledge of the agency of African states and elites that are pushing back against Chinese practices or projects they consider inimical to their interests, as well as lessons learnt by Chinese actors operating in African ‘petrolized’ contexts.

Another important issue is that of the existence of zero-sum competition between Chinese SOCs and Western oil MNCs over Africa’s oil and gas (p.181) resources. New information is gradually emerging showing that while there is competition, there is also cooperation between Chinese SOCs and Western MNCs in oil operations in Nigeria, Angola, and other African petro-states. Several scholars go as far as to suggest that Chinese SOCs are relatively autonomous of the Chinese state and operate like regular oil multinationals defining their corporate missions as seeking maximum returns/profits on oil investments (Patey, 2017; Manero, 2017; Zhenxing, 2013).

In the light of the foregoing, the oil sector is a useful context for understanding the evolving nature of China–Africa relations. It is also a point from which to glean empirical evidence supporting the thesis of African agency as an influencer and shaper of such relations, and how the lessons Chinese ‘latecomer’ SOCs are learning in the course of investing in African oil-producing countries shapes relations. This will enable us to transcend the cul-de-sac of pre-determined outcomes, based on assumptions of Chinese neo-imperialism, African dependence or vulnerability. By analyzing China–Africa interactions in relation to a strategic commodity, oil, using three case studies, this chapter explores the factors that influence Chinese SOC behaviour towards African petro-states, including their broader ramifications for changes in China–Africa relations, particularly the development of the continent.

9.4 China and Nigeria: How is the ‘Sweet Crude’ Tilting the Balance?

China’s SOCs entered the Nigerian oil sector in the quest to expand access to global oil investments when Petro-China signed a contract in 2004, valued at US$800 million, with the Nigerian National Petroleum Corporation (NNPC), the Nigerian state oil corporation, to supply 30,000 barrels of crude oil per day to China (Mbachu, cited in Cheru and Obi, 2011: 185). This coincided with the signing of ‘an agreement between Chinese NOC, Sinopec and the NNPC to develop five exploration wells’ (Obi, 2010: 185). In 2005, the China National Offshore Oil Corporation (CNOOC), the largest offshore oil and gas SOC in China, bought a 45 per cent stake in the Apo oil-for-gas field in Nigeria, valued at US$3 billion, regarded as CNOOC’s largest acquisition in the world at the time. Following a visit by the Chinese president to Nigeria in 2006, Chinese SOCs were granted the right of first refusal for four oil blocks by the NNPC in exchange for the rehabilitation of the Kaduna refinery and several infrastructure development deals.

However, a year later, most of the oil-for-infrastructure deals involving Chinese SOCs were either cancelled by the Nigerian government or simply petered out. The government was clearly asserting its power over oil and (p.182) expressing its autonomy in decision-making relating to getting the best deal for its oil. Another example of this was in 2009, when the ‘Nigerian government rejected CNOOC’s offer of interest in twenty-three oil fields for which leases to Western oil interests were about to expire after news of the offer was leaked to the press’ (Cheru and Obi, 2011: 102).

According to Umejei (2013), two explanations could be advanced for the collapse of the oil-for-infrastructure deals. He identifies the first as ‘the interest of Nigerian elites, who felt implementing the deal would cut them off from crude oil sales on the international market’, and the second as ‘the influence of IOCs, who contributed in developing the Nigerian oil industry and their influential home countries’. Either way, Nigerian elite perceptions of the value of Chinese oil engagement were decisive in the decision not to proceed with the oil deals. There is no doubt that the Chinese did learn some lessons from the experience and became more cautious about engaging in oil investments in Nigeria. This contributed to a shift away from oil-for-infrastructure deals and towards getting direct access to Nigeria’s oil fields through global acquisitions and mergers.

In August 2009, Sinopec’s acquisition of Addax, a Geneva-based oil company, gave it control of two offshore oil fields owned by the Nigerian subsidiary of the company. As a result, Sinopec struck oil at Addax’s UDELE 3 oil well in the Niger Delta in July 2010, giving it direct access to some of Nigeria’s oil. Given the recent trends in the Nigerian oil industry, the combination of prolonged insecurity, uncertainties related to the non-passage of the Petroleum Industry Bill (PIB) in its original form (a Petroleum Industry Governance Bill (PIGB) was passed by the House of Representatives in 2018) by the National Assembly, and allegations of corruption levelled against the NNPC, the nature of oil investments have been affected. This atmosphere of uncertainty around oil industry regulation, and changes in the global oil market is leading some Western oil MNCs to sell to onshore oil blocs in Nigeria; thus the way has been opened for those willing to take on risks in the oil sector.

In 2012, Sinopec bought a minority stake (20 per cent) in a Nigerian oil field from Total of France for the sum of US$2.5 billion (Hu, Wu, and Patel 2012; Kavanagh, 2012), increasing the level of its direct access to Nigeria’s oil. Analyzing this development, Quigley (2014), makes the point that ‘almost all the investments by Chinese companies are in buying shares in blocks, not sole control, so that the Chinese often rely on their IOC partners to do most of the actual production work for them, releasing them from the technological demands that come with offshore drilling’. What is not clearly mentioned, but implied, is that Chinese NOCs have learnt from their previous experience with oil-for-infrastructure deals, just as the Nigerian elite continues to straddle scepticism and acceptance of Chinese investments and aid. It is also important (p.183) to note that Chinese SOCs are partnering with Western IOCs and service companies (rather than competing) in oil investments in Nigeria.

This shows SOC integration into transnational petrolized oil capital in the search for access to Nigeria’s oil reserves and profits. It is not all too clear what the response of the Nigerian ruling elite is to this trend. So far, while oil is a prominent commodity in the trade between both countries, it is not the only one. The view of a ‘scramble’ for Nigeria’s oil between the United States and China has also been laid to rest (Taylor, 2014: 403), in the context of decreased demand for Nigeria’s oil by the United States (partly due to rising levels of domestic oil production in the United States) and the general recent slump in the global oil market. It is also not clear that China has been able to snap up the difference, as most of Nigeria’s oil exports still end up in Europe. If recent developments are anything to go by, some Chinese SOCs may be rethinking their oil investments in Nigeria. For example, a Reuters report late in 2017 speculated that Sinopec ‘had hired BNP’ to sell its oil assets in Nigeria, in the face of declining global oil prices, insecurity in the Niger Delta, and reports in sections of the global media about an investigation in the United States into the alleged bribing of Nigerian officials by Addax (acquired by Sinopec) to resolve a business dispute (Miller and Schoenberg, 2017; Reuters, 2017). Although the contents of the reports have been denied by Sinopec, it does partly confirm the point that the SOC operates purely by the profit logic, and is ready to move investments from high-risk areas to places where it is more likely to get optimal returns.

There is no real evidence to show that Chinese SOCs have been able to leverage their quest for oil at the expense of their Nigerian partners. However, there is evidence of two broad developments. First is the acquisition of oil assets in Nigeria through the takeovers of global oil companies seeking to offload their oil assets in the global South, or acquisition of shares in Nigerian subsidiaries of Western oil MNCs, and the expansion into non-oil sectors of the economy, particularly trade, construction, and infrastructure. Earlier this year it was reported that two Chinese companies, COOEC (a subsidiary of CNOOC) and China Harbour Engineering Company, had won a contract to build oil pipelines for the Dangote Group (XinhuaNet, 2018), a Nigerian conglomerate, showing the flexibility of Chinese SOCs in relation to investments in Nigeria’s oil and gas sector. Also, Harbour Engineering and Sinopec signed a deal to build a modular refinery in Edo state, Nigeria (Vanguard, 2018). Nigeria’s petro-elite continues to exert great influence over ‘who gets what’, and determine how the country engages Chinese SOCs.

To echo the thoughts of Cheru (2016), ‘transforming the new relationship with Chinese SOCs to a “win–win” situation will ultimately depend on African agency’. Also important is Taylor’s observation that the reality of Nigeria’s political economy, including its unpredictability, ensures that neither the (p.184) United States nor China can avoid the vulnerabilities associated with Nigeria’s rather raucous petro-politics (Taylor, 2014). Time will tell where the pendulum will swing—towards greater engagement of a Nigerian petro-elite by Chinese SOCs or a continued preference for ad hoc short-term bids for acquisitions and deals that can deliver optimal returns from oil investments without any coherent long-term strategic/economic vision in mind. Either way, the evidence clearly suggests that the Chinese SOCs are not displacing Western oil MNCs (which are giving up onshore oil fields of their own volition), nor are the SOCs taking over oil blocs given up by the oil MNCs. There are also no signs of an agenda for the takeover of Nigeria’s oilfields by the Chinese state, or steps by Chinese SOCs towards dominating Nigeria’s oil fields. If anything, the Chinese SOCs have literally burnt their fingers several times in the course of learning how to better navigate Nigeria’s complex oil business landscape.

9.5 Angola: Petro-Nationalism or Transnationalized Engagements?

Angola offers a similar, though more deliberate form of engagement with Chinese SOCs (Burgos and Ear, 2012: 351–67, Corkin, 2011), particularly Sinopec which entered Angola’s oil fields in 2004 when it bought a 50 per cent stake in Block 18, operated by BP and sold by Shell. Sinopec later formed a joint venture with the Angolan state oil corporation Sonangol (Alves, 2012: 100; Corkin, 2011). Angola, Africa’s second-largest oil exporter, remains the largest source of China’s oil imports from the continent, followed by the Republic of Congo (following the decline in Sudan’s and later, South Sudan’s oil production). Although some pundits argue that Chinese SOCs entered Angola on the heels of oil-backed credit lines from the Chinese Exim bank, the initial euphoria that came with Sinopec’s successes in acquiring shares in oil Blocks 18, and 3/80 in 2005, turned out to be rather short-lived. There is no doubt that the entry of Chinese SOCs may have initially benefited from a large-scale effort in the direction of oil-for-infrastructure deals and oil-backed loans, buoyed by the quest of Angola’s governing elite to fund post-civil-war reconstruction efforts.

Sinopec initially ‘benefited’ from Sonangol’s rejection of the deal that Shell signed with India’s ONGC Videsh for 50 per cent of Block 18 in 2004, after which the Angolan oil corporation handed the shares over to the Chinese SOC. Although Sinopec similarly benefited in the following year, 2005, when it also ‘acquired Block 3/80 previously owned by Total, after Sonangol refused to renew the French oil company’s contract’ (Corkin, 2011), their partnership was not altogether unproblematic. Alves (2012: 100–1) notes that tensions (p.185) developed in the partnership between Sinopec and Sonangol in 2006 and 2007. In 2006, the disagreement was over the payment of a specific amount considered high by Sinopec as payment for signature bonus to Sonangol, following its successful bid for oil blocks in Angola.

The ‘commercial disagreement’ in 2007 was reportedly rooted in an aspect of the joint venture agreement between Sinopec and Sonangol for building an oil refinery in Angola. According to Alves (2012: 101), ‘whereas Beijing wanted to supply the Chinese market, Luanda envisaged supply to its domestic and Western markets (US and Europe)’, leading to Sonangol’s decision to terminate the Sonaref project with Sinopec, and award the contract for the building of the refinery to an American firm. This was a clear example of the Angolan petro-elite’s decision to act in line with what it considered to be its interest. Following the disagreement, Sinopec suffered some other reversals in its bid to acquire additional oil interests in Angola. Of note was its attempt in 2009 to partner with CNOOC to acquire 20 per cent shares of oil Block 32 put up for sale by Marathon Oil, which was blocked by Sonangol (Alves, 2013: 102). This again underscores the point about the agency of Angola’s petro-elite and how they did not hesitate to leverage their ownership of oil over Chinese SOCs. In this regard, China’s inroads into the country and its use of credit lines recorded more success in other economic sectors, particularly construction, rather than oil which remains largely dominated by Western oil MNCs such as ‘Marathon, Total, Chevron, Texaco, Exxon and BP’ (Quigley, 2014; Zhao, 2011).

The evidence suggests that China’s presence in the oil and other sectors of the Angolan economy has had to contend with Angolan ministries, the ‘strong’ Angolan SOC Sonangol, and other institutional arrangements, including the Reconstruction Office (controlled by the president) that ensure that loans and deals offered to China are used in ways that reflect national priorities (Mohan and Lampert, 2013). While there are those who raise issues about the lack of transparency in most of Chinese engagement with Angola, the point remains that the Angolan state and petro-elite play a key role in the engagement with Chinese SOCs. What can be gleaned goes beyond ‘a particular form of African political agency’ (Mohan and Lampert, 2013: 99), to the integration of the Angolan elite and the NOCs into a transnationalized form of capitalist oil relations based on mutual gains, but decisively mediated by the Angolan state. Most recent figures about oil imports from the continent continue to place Angola as the leading African oil exporter to China, and the third global supplier of China’s oil imports. In spite of this, the experience of Chinese SOCs seeking a foothold in Angola’s oil fields has been mixed. What is clear is that as is the case in Nigeria, the governing elite is not surrendering its autonomy to decide who gains access to its strategic oil fields, even as Chinese SOCs are learning important lessons and becoming more pragmatic and realistic in the ways they engage the Angolan petro-state.

(p.186) 9.6 The Two Sudans: SOC Success and Losses Wedded to African Agency?

The cases of Sudan, and after the breakaway and independence in 2011, South Sudan, are particularly instructive for understanding the changing dynamics of Chinese SOC engagement with African petro-states. There are several reasons for this. In the first place, Sudan was the first African state where Chinese SOCs struck oil and fully built an integrated oil industry from scratch. The country also hosted China’s largest oil investments. At the time the Chinese National Petroleum Corporation (CNPC) arrived in Sudan in the mid-1990s following the retreat of Western oil MNCs, Chinese SOCs were largely unknown outside their country—minnows in the global oil scene (Patey, 2014). Chinese SOCs recorded their first major breakthrough into Africa’s oil scene in Sudan in 1996, when CNPC, in partnership with Petronas, Sudapet, Talisman, and India’s Oil and Natural Gas Corporation Videsh (OVL), formed the Greater Nile Petroleum Corporation (GNPC) and commenced oil production in southern Sudan, followed by oil exports in 1999 (Obi, 2010: 184). The GNPC was followed by Petrodar Operating Oil Company (PDOC), made up of consortia of China’s CNPC, Nilepet, Malaysia’s Petronas, Sinopec, and Tri-Ocean Energy of Kuwait also operating in southern Sudan. This process transformed Sudan (before 2011) into the third-largest oil producer in Africa, and one of Africa’s top oil suppliers to China. It also afforded Chinese SOCs—in the absence of Western oil multinationals forced out by domestic pressures from human rights groups, Western governments, and insecurity occasioned by civil war (Patey, 2017: 760–1)—the opportunity to develop their capacity and gain valuable experience investing in and building the Sudanese oil industry (Patey, 2014: 111–20).

In spite of the success story of Chinese SOCs in Sudan, there has been a noticeable decline in their fortunes since the independence of South Sudan in 2011. As Patey notes, ‘until South Sudan’s separation in 2011, which stripped away three-quarters of Sudan’s oil resources, Sudan was the third largest oil producer in sub-Saharan Africa after Nigeria and Angola’ (2017: 760). The split adversely affected CNPC’s fortunes as the SOC could do little but seek to adapt to the new situation in the two Sudans. This case affirms the earlier point of the agency of African petro-states and elites vis-à-vis Chinese SOCs, including the ways in which the former have leverage over the latter. As Patey (2014: 4) notes, ‘the violent and unstable politics of oil in Sudan and South Sudan’ have restricted Chinese SOCs, which underscores the point about how African petro-states and elites influence China.

Given the geography of oil endowment in the Sudan, the independence of the South where most of the oil is located exposed China, which had long-term relations with Khartoum, to the vagaries of Sudanese politics, which was (p.187) further complicated first by bickering between the North and South over oil, then by the outbreak of civil war in the South shortly after its independence. Although the CNPC and the Chinese government tried hard to build cordial relations with South Sudan, without necessarily alienating the North, this did not insulate them from the testy relations between both countries. The shutting down of oil fields by the government of South Sudan in 2012 over a disagreement with the North over pipelines through which all the oil was piped for export led to severe losses to Chinese SOCs and brought home the lesson of their vulnerability in rather painful ways. The high-risk nature of Chinese SOC investments in Sudan and South Sudan, and the losses suffered, also show the limits of China’s so-called resource diplomacy in Africa.

As it turned out, Chinese SOCs have little or no leverage over either side, and there is very little the Chinese state can do about the situation except to engage in bilateral and multilateral efforts aimed at bringing peace to the Sudans, including the deployment of Chinese UN peacekeepers to both countries. This also reflects the point made earlier in this chapter and affirmed by Patey (2014, 2017; Walker, 2014), relating to the relative autonomy of Chinese SOCs, which are not executing a state-directed agenda, but are clearly driven by a ‘corporate agenda to ensure survival and wellbeing by acquiring new oil reserves and production’ (Patey, 2014: 82), which translate into profit. With time it is becoming more obvious that Chinese SOCs will have to balance their investment decision-making against the risk factors inherent in African petro-states, not least the political terrain and the interests of competing political elites. At this point the dichotomies that underpin mainstream narratives of China–Africa relations are of limited analytical value. Chinese SOC engagements are primarily driven by the quest for profit, including minimizing risks, while maximizing returns on investments. What we see are changes in the behaviour of SOCs as they seek to pragmatically adjust to or respond to Africa’s petro-states and elites. Part of the lessons learnt by Chinese SOCs is not just about developing strategies for cutting their losses in South Sudan after a good run up till 2011, but prioritizing the diversification of its international oil investments away from the emerging high-risk Sudans to other African countries, and other parts of the world.

9.7 Conclusion

China–Africa relations are more complex than is often presented (Corkin, 2015; Wang and Elliot, 2014: 1012–32). In spite of the official rhetoric on both sides, both still have a lot to learn from, and about each other. However, the three case studies in this chapter suggest that a more accurate reading of the trends and prospects of relations partly lie in unravelling some of the (p.188) ‘fictions’ embedded in the ‘truths’ that are often accepted and deployed in some official and media circles or scholarly debates. In the past two decades, Chinese SOCs have gradually established themselves across a growing number of established and emerging African oil-producing countries. With the exception of Sudan, and later South Sudan, Chinese SOCs are fast learning about oil operations on the continent, and also using some of the experiences from the continent to strengthen their international operations elsewhere across the world (Patey, 2017). The success of oil-for-infrastructure in opening up Africa’s oil fields to Chinese SOC investments has been somewhat mixed, if not disappointing, following the initial euphoria generated by pundits of a ‘looking East’ moment in Africa’s international development cooperation options.

The changing dynamics of Chinese oil engagements with African petro-states over the past two decades reflects a learning curve at several levels: the accumulation of experiences both in terms of the technologies, management, and risks associated with the complex operations of the oil industry, growing pragmatism in terms of diversifying operations across established and emerging African oil producers, while realizing the limitations of oil-for-development as a strategy for gaining access to Africa’s oil and gas fields, and collaborating with Western and non-Western oil companies in tapping into lucrative oil operations in Africa. Perhaps more significant is the observation that rather than being the new ‘oil colonizers’, Chinese SOCs have had to contend with Africa’s governing elites who are acutely aware of the leverage, choices, and autonomy that oil power confers on them and do not hesitate to use it to their advantage either by blocking Chinese SOCs based on strategic calculations, or playing them against other foreign and Western oil companies. This is a further challenge to the SOCs seeking a foothold in an African oil sector that is still dominated by more experienced and sophisticated Western oil companies.

China’s evolving relation with Africa continues to reflect a mix of opportunities and challenges. It is mediated by the relative autonomy of Chinese SOCs from the Chinese state, the high premium placed by the governing elites of Africa’s petro-states on controlling access to the oil within their countries, including the limitations this places on the capacity of Chinese SOCs to pursue their goals vis-à-vis the agency of African elites. Ultimately, the outcome of China’s engagement with Africa will depend on how effectively African states, leaders, and governing elites can purposely use the opportunities presented by the current conjuncture in its ties with emerging Southern powers such as China to strategically advance a holistic developmental project.

Perhaps the building of partnerships between Africa and Asian SOCs alongside strategic engagements of Western ‘oil majors’ will help catalyze oil and gas production capacities in terms of technological innovation and managerial skills and facilitate the transformation of the continent. The changing (p.189) dynamics of Chinese engagements with African oil-producing states can either open the space for connecting African agency to a transformative project, or close it. This requires an African agency that is both strategic and transformative, which goes beyond usual rhetoric of ‘win–win’ partnerships. This project of transformation must be participatory and people oriented, based on the will and desire of a visionary African leadership to integrate a developmental ethos into state–society relations in re-directing the purpose of strategic and productive economic engagements to serve the interests of the African people.

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