China-Africa Energy Cooperation: A Model of "South-South" Mutual Benefit and Win-Win

The 7th Beijing Summit of the Forum on China-Africa Cooperation in 2018 will be held in Beijing from September 3 to 4. The theme of this summit is "Win-win cooperation and work together to build a closer China-Africa community with a shared future." This summit is held under the background of China's full entry into a new era of building socialism with Chinese characteristics and China's efforts to promote the construction of the "Belt and Road" and build a "community with a shared future for mankind". It is expected to exceed previous conferences in terms of scale, level and results. . With the countdown to the summit, the summit has attracted more and more attention from the world.

　　 As we all know, before the 1990s, China-Africa cooperation focused on political mutual trust and economic assistance. Since then, economic cooperation based on the principles of marketization has become the core of China-Africa cooperation. In the past 30 years, infrastructure construction, oil and natural gas development and utilization, and mineral resource development have been the three pillars of economic cooperation between China and Africa. As one of the pillar industries, what is the history of energy cooperation focusing on the development and utilization of oil and natural gas in the past? What impact has it produced? What problems and challenges are facing? How to achieve the sustainable development of China-Africa energy cooperation in the future? As an oilman who has worked on African oil projects, the author will briefly review and discuss here.
　　 First of all, China-Africa energy cooperation has gone through a process of "from north to west to east", basically covering the entire territory of Africa. China-Africa energy cooperation started with CNPC's oil exploration and development in Sudan's 6 districts in 1995. Looking back over the course of more than 20 years, China-Africa energy cooperation has basically gone through three stages. The cooperation hotspots of the first stage were concentrated in North Africa, and the time span was about ten years from 1995 to around 2004. At that time, Chinese oil companies, mainly PetroChina, carried out large-scale oil and gas investment, construction and operation activities in Sudan (including South Sudan) and Algeria. The key milestones include the completion and commissioning of 10 million-ton oil fields in Sudan 1/2/4 area in 1999 and the formation of an integrated upstream and downstream supporting project, the large discovery of 100 million-ton recoverable reserves in Sudan 3/7 area in 2003, and 2004 The first phase of the oilfields in Sudan's Block 6 was put into production, and PetroChina and Sinopec successfully entered the Algerian upstream market in 2003 and 2004 respectively.
The cooperation hotspots in the second stage were concentrated in West Africa. From 2005 to around 2010, during this period, China’s three major petroleum central enterprises, mainly Sinopec, CNOOC, and CNPC, achieved "multiple breakthroughs" in West Africa. The following are: In 2004, Sinopec successfully achieved breakthroughs in Angola and Nigeria. For example, it purchased 50% of the shares of Angola Offshore Block 18 from BP Petroleum Company. Later, the project became Sinopec’s overseas core asset and the most profitable project. One; In 2006, CNOOC acquired 45% of the shares in the Nigeria offshore Akpo development block from Total; around 2007, CNPC successively obtained the leading operation rights in the risk exploration blocks in Chad and Niger in West Africa, and in the following several years Major discoveries of accumulated geological reserves of hundreds of millions of tons.
The cooperation hotspots of the third stage are concentrated in East Africa. From 2010 to 2015, during this period, ENI (Italian National Oil Company) and Anadarko (American Independent Oil Company) took the lead in East Africa, Mozambique and Tanzania. The world-class natural gas discovery has made this area a "hot" area for international oil and gas cooperation. Naturally, this area attracts the attention of this large Chinese oil company. The most typical example is PetroChina’s successful acquisition of 20% of ENI's Mozambique Offshore Block 4 in 2013, which has become the weight of this multi-billion-dollar investment in natural gas and LNG projects. Class players (ExxonMobil also joined the project in 2017). Around 2010, Chinese oil companies have successively entered the East African oil and gas markets such as Kenya, Ethiopia, and Uganda. Among them, private companies such as GCL-Poly have made significant progress in natural gas exploration and development in Ethiopia.
According to publicly available data, the cumulative equity investment of Chinese oil companies in Africa in the past 20 years has reached more than 80 billion US dollars; North Africa, West Africa (including Central Africa) and East Africa oil project clusters have been formed respectively, with an annual output of 110 million tons. About the crude oil production capacity. In 2017, the output equivalent of Chinese oil companies' operations in Africa was about 80 million tons, and the equity output had exceeded 40 million tons; the return on investment was close to the industry average. The African region has become one of the largest overseas cooperation zones cultivated by Chinese companies "going out", and energy can be called the "ballast stone" of China-Africa economic and trade cooperation.
　　Secondly, China-Africa energy cooperation is a brilliant chapter in the "industrialization" process of Africa's key resource countries. In the author’s opinion, the most significant and meaningful achievement of China-Africa energy cooperation is the rapid globalization of the past decade, through oil investment, and matching engineering technology, engineering construction, equipment manufacturing and production capacity. The construction has enabled China's capital, petroleum industry technology and standards, equipment manufacturing capabilities, and talents to be transferred to Africa on a large scale and take root, helping Africa to catch the globalization express, making "development" basically Africa The core of the consensus of the people is "industrialization." The industrialization represented by the petroleum industry is an important means for Africa to achieve development and to achieve integration with the modern world. The most typical example in this regard is that PetroChina helped Sudan, South Sudan, Niger, and Chad establish a modern oil industry system with an integrated full industrial chain, making these once the world's poorest and backward countries become representatives of new industrialization in Africa. .
On the other hand, while achieving sustainable development through “deep cultivation and meticulous cultivation”, Chinese oil companies have made significant investments in Africa in terms of localized operations, oilfield community construction, and social welfare undertakings, and continue to build a “mutual benefit and win-win” cooperation between China and Africa. The model. For example, in Sudan and South Sudan, PetroChina has invested hundreds of millions of dollars in corporate social responsibility and public welfare, and provided tens of thousands of local employees with job opportunities, benefiting millions of people. The localization ratio of employees in the Sudan project has exceeded 90. %. For another example, in Nigeria and Angola, CNOOC and Sinopec attach great importance to the environmental protection of sea exploration and development, and work with their partners to establish a comprehensive and systematic HSE management system. HSE records and performance maintain the international advanced level.
　　 Once again, China-Africa energy cooperation is currently facing five risks in "security, compliance, resources, markets, and public relations." While China-Africa energy cooperation has achieved great success, we must clearly realize that due to the intensification of global political and economic turbulence, the increasing uncertainty of oil geopolitics, the decline of international oil prices, and the fluctuations in the political situation of resources, the current and future During this period, the risks of China-Africa energy cooperation have increased. One is that the security risks to the investment and operation of Chinese oil companies due to terrorism and tribal conflict remain high. For example, the "Boko Haram" terrorist organization active in Nigeria, Chad and other places has caused great harm to the field operations of the oilfield; after South Sudan became independent, conflicts between tribes continued to intensify, which has been interfering with the normal production and operation of Chinese oilfield projects. .
　　 The second is that compliance risks continue to be high. Most of the resource countries in Africa have low levels of social governance, low marketization and transparency, and corruption is more common. As a result, petroleum projects face endless legal and compliance risks in the process of preliminary development negotiations and subsequent operation and management. Chinese oil companies often encounter the dilemma of "predecessor president signing contracts and subsequent presidents breaking contracts" in Africa. Moreover, Chinese companies have also encountered huge fines for being caught in “environmental protection traps” and “community disputes”.
　　 Third, resource and market risks are also very prominent. Most of the oilfield cooperation projects of Chinese oil companies in Africa began in the late 1990s or this century. After more than ten years of development, some major oilfields have entered the middle and late stages of development and production, and subsequent reserves are weak, and exploration is urgently needed. Discover new reserves. Due to block area restrictions or contractual restrictions and other reasons, Chinese companies' prospects for exploration in Africa are not optimistic and face greater resource risks. In addition, Chinese companies are engaged in investment and development in some landlocked countries in Africa. They are far away from the main body of the consumer market. The cost of oil export is very high, or it is difficult to open up the export channel to realize the value of crude oil. There is a greater market risk.
　　Moreover, the ability of Chinese oil companies urgently needs to be improved in terms of how to deal with the government relations of the host country, how to deal with the media and non-governmental organizations (NGOs). Especially when it comes to dealing with Western-based media and NGOs, Chinese oil companies have suffered a lot of "dark losses" in Africa, and some have even gained the notoriety of "resource predators" and "environmental destroyers." Public relations risks involve corporate reputation. Once a problem occurs, it is extremely difficult to repair.
　　 Finally, China-Africa energy cooperation can be regarded as a model of "South-South" cooperation. There are "10,000 reasons" to carry out China-Africa energy cooperation to the end. Despite the risks of one kind or another, China-Africa energy cooperation is generally very successful and can be regarded as a model of "South-South cooperation." Looking forward to the future, we should continue to improve the level and level of China-Africa energy cooperation based on the principles of mutual benefit, win-win and common development, and build the African region into an important cooperation zone that is "in-depth, effective, and influential." The so-called deepness means to continue to make good use of the good political and economic relations between China and Africa, give full play to the advantages of China’s leading operations, actively cooperate with international counterparts, and follow the idea of ​​“consolidating North Africa, strengthening West Africa, and expanding East Africa”, and resources China has developed in-depth cooperation. The so-called benefit is to ensure the effective development of oil and gas development and production projects led or participated by the Chinese side. While seeking to achieve a reasonable return on investment, it also contributes more revenue, profits and taxes to the local government and society to support local economic development. The so-called influential is to strive to make every major oil and gas cooperation project a high-quality product based on the principle of excellence, to establish a good influence of Chinese energy companies in Africa, and to enhance our soft power.
　　 Let us join hands with African partners and international counterparts to carry out China-Africa energy cooperation to the end, and further promote oil and gas cooperation to go deep, stable and long-term.
This article is transferred from China Petroleum News Center