Oil in Africa

Background

Oil is definitely among the most important natural resources of our time.  According to a report by the African Development Bank and the African Union, it is estimated that in 2025 global oil demand will have increased by 57% compared to today. Considering that oil is non-renewable and therefore not available limitlessly, competition will rise along with increasing demand.Even though Africa’s oil reserves are estimated to only be 9-10% of the world’s total, they have gained major importance over the last couple of decades.

In the past 20 years, the known quantity of oil in Africa grew by over 25% and it is estimated that oil production will rise continuously at an average rate of 6% per year.  They key sub-Saharan player is Nigeria, which produces around 2.2mn barrels a day. But other countries such as South Sudan, Angola and the Democratic Republic of the Congo hold an important share as well. Recently, a new actor entered the stage, when United Kingdom-based firm Tullow Oil, announced the discovery of oil reserves in the Turkana region in northern Kenya. Even though it is too early to tell its actual size and commercial viability, there are already hopes that oil revenues could foster commercial development in Kenya like they did in neighboring Uganda.

Why is oil relevant for Africa?

Though expectations may be high and though there is no doubt that oil fosters development and brings new possibilities, previous experience has also shown that the black gold comes with risks attached. In the past, many countries have been hit by the so-called resource curse: the phenomenon where an abundance of natural resources does not necessarily benefit the country owning them and can even have negative effects on its economy and society. This phenomenon is created by a variety of political and economical factors. Nigeria’s abundance of oil for example, was not only responsible for violent conflict and damages to its environment but has also connected its fate too closely to fluctuations in the world market.

Additionally, increasing world market prices are a big threat for those African countries that depend on oil imports rather than exports.  With increasing global demand, this problem will probably be exacerbated in the future. Even though high oil prices pose difficulties to the economies of all oil importing nations, developing countries are especially vulnerable. This is true for many African oil importing countries as well. According to the International Energy Agency, costs of oil imports totaled $18bn in sub-Saharan Africa in 2011 and therefore outweighed the $15.6bn of development aid received in the same year.

Another important aspect is how oil trade and the consequent foreign involvement influence Africa. The continent is the second largest source of oil imports for China which gets almost one third of its imports from there. But while China has mostly pursued a style of trade that does not interfere too much with the internal affairs of the respective countries, Western trade agreements often come with strings attached. Both approaches have drawn criticism and stand accused of taking advantage of Africa, to secure their own energy interests.

Oil (and everything connected to it) has always been a sensitive issue. African oil is no exception. Sustainable management and strategies are necessary to handle the implications of the black gold and to prevent the blessing from turning into a curse.

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