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China Seeks Big Stake in Africa's Resources

China's African strategy for oil resources

China's African strategy for oil resources

In yet another example of its increasingly competitive global strategy, China is shopping aggressively for commodity resources in the Dark Continent.  If you’ve kept up to date as I try to with China’s oversea investments in the African continent’s commodity and energy sectors you’re probably aware of the fact China has been shopping for commodities in emerging markets. Africa, and to a lesser extent South America, have been the primary beneficiaries of China’s FDI dollars between 2000-08. The two continents are home to abundant supplies of natural resources that China needs to sustain its robust economic growth. The two continents are also home to various countries that are hungry for foreign direct investment in their commodity sectors which until recent had been the main fuel behind their respective economics booms.

Under China’s foreign policy principle of ‘no political strings attached,’ China’s trade with the continent has no hidden ideological agenda. China and most Africa nations share the view that countries should not meddle in each other’s affairs. They have acknowledged that they can achieve common development only through cooperation based on mutual trust and mutual benefit. The pursuit of their own interests has brought them closer. Economic cooperation between the two sub-continents has grown at a robust pace. And China has stated its ambitions to move its trade with Africa to top $100 billion by 2010. That’s why this piece from today’s Financial Times of London is so interesting:

Lagos (FT) — A Chinese state-owned oil company is in talks with Nigeria to buy large stakes in some of the world’s richest oil blocks in a deal that would eclipse Beijing’s previous efforts to secure crude overseas. The attempt could pitch the Chinese into competition with western oil groups, including Shell, Chevron, Total and ExxonMobil, which partly or wholly control and operate the 23 blocks under discussion. Sixteen licenses are up for renewal.

CNOOC, one of China’s three energy majors, is trying to buy 6bn barrels of oil, equivalent to one in every six barrels of the proven reserves in Nigeria, sub-Saharan Africa’s biggest crude producer and a major supplier to the US.

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Details of the talks were revealed in a letter from the office of Umaru Yar’Adua, Nigeria’s president, to Sunrise, CNOOC’s representative, a copy of which was obtained by the Financial Times. The overall value of the Chinese offer is not disclosed, although some details suggest a figure of about $30bn. Some oil sector executives said the total on the table was $50bn. A spokesman for Mr Yar’Adua said: “Negotiations are ongoing not only with Sunrise/CNOOC but also with all other stakeholders in the industry. The federal government has not taken any final position on the issue.”

The letter, dated August 13, said an initial offer was “unacceptable” but added: “Your interest in all the listed blocks will be considered if your revised offer is favourable.”  Details of how the Nigerian government would allocate equity in the blocks to CNOOC have yet to emerge and it is unclear whether this would involve forcing western groups to relinquish stakes.  Read more here.



Elison Elliott

Elison Elliott , a native of Belize, is a professional investment advisor for the Global Wealth and Invesment Management division of a major worldwide financial services firm. His experience in the global financial markets span over 18 years in both the public and private sectors. Elison is a graduate, cum laude, of the City College of New York (CUNY), and completed his Masters-level course requirements in the International Finance & Banking (IFB) program at Columbia University (SIPA). Elison lives in the northern suburbs of New York City. He is an avid student of sovereign risk, global economics and market trends, and enjoys writing, aviation, outdoor adventure, International travel, cultural exploration and world affairs.

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