Africa's Oil Is Cheap, but Often a Hassle Market Trends Tempt Big Oil Producers

By Judith Matloff, writer of The Christian Science Monitor | The Christian Science Monitor, October 16, 1996 | Go to article overview

Africa's Oil Is Cheap, but Often a Hassle Market Trends Tempt Big Oil Producers


Judith Matloff, writer of The Christian Science Monitor, The Christian Science Monitor


Judging by the numbers, West Africa sounds like a more attractive place to do oil business in than the North Sea. West Africa has reserves of 25 billion barrels, which cost $3.50 per barrel to produce. In contrast, the North Sea has reserves of 15 billion barrels. Production costs $10 a barrel.

So why do oil companies invest $13 billion yearly on offshore North Sea developments to produce 5 million barrels a day versus the $2.5 billion spent to produce half that amount in West Africa? Some industry leaders seem to be pondering that question these days.

With the air of people in on a good secret, a group of international oil executives gathered at a conference here recently to discuss doing business in Africa. Their conclusion was simple: The continent provides rich potential for the intrepid who can withstand its myriad frustrations of poor infrastructure, heavy state control, and corruption. "There are exciting prospects in Africa," says Eric Daffern, group leader of the World Bank's Oil and Gas Division. But he adds that "Africa needs to make itself more attractive. It's the hardest part of the world to work in." On the gloomy side, experts see a continent where reliable information is scarce, regulation extreme or outdated, and banking services are sometimes nonexistent. Matters are not helped by political instability in many nations and poorly maintained refineries suffering financial losses. But while acknowledging the hardships, executives find encouraging trends in a region long associated with war and famine: growing political stability in many African countries and a shift toward market-oriented economies and high levels of economic growth in others. "I believe Africa is starting to show its teeth. Already a lot of money from the East is starting to seek out Africa," says John Greensmith, British Petroleum's managing director for Africa.

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