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Analysis: China dedicated to Nigerian oil

disclaimer: image is for illustration purposes only
by Carmen Gentile
Beijing, China (UPI) Jul 18, 2008
China has committed $1 billion to the creation of a six-lane highway surrounding Nigeria's de facto oil capital, Port Harcourt, the latest indicator of Beijing's intent to become a leader in African oil extraction.

The China Harbor Engineering Co. signed a deal this week with the African Finance Corp. for the 75-mile road that AFC officials said in a statement also would help improve other aspects of Port Harcourt's crumbling infrastructure, such as electricity, and would "be a catalyst to the city's economic development."

The State Grid Corp. of China is also slated to play a role in improving the city's and the region's electric grid during construction of the road.

The agreement this week marks the latest effort by China to further its position in Nigeria's troubled energy sector, which in recent months has slipped from the oil-and-gas-rich Niger Delta.

The violence plaguing other foreign energy firms doesn't seem to bother Chinese officials, however, as investment in Nigeria has increased considerably over the last few years, while other nations' firms have downsized operations or pulled out altogether.

Nigeria and China already enjoy strong relations in the energy sector. Beijing in 2006 bolstered those ties when it signed a deal for four oil drilling licenses in exchange for a promised $4 billion to be spent on power stations and a railroad for Nigeria.

Since then, Africa's largest oil producer and the world's fastest-growing economy have been steadily improving energy relations. According to Nigerian officials, bilateral trade has increased steadily since the beginning of the decade and tops $50 billion per year.

China is apparently undaunted by the challenges of oil and gas exploration in Nigeria, where violence directed at foreign oil firms operating in the petroleum-rich Niger Delta is the norm.

Despite Nigeria generating an estimated $300 billion in oil revenue since the 1970s, most Nigerians remain in poverty, a condition that has given rise to the violence that has affected production in Nigeria -- for both state and foreign oil firms.

Militant groups assert that residents of the Niger Delta should receive a greater portion of the oil wealth reaped by the government and foreign companies. Attacks have taken a heavy toll on production, according to Nigerian energy officials, who contend oil production is down more than 20 percent to less than 2 million barrels per day.

Amid the violence, China has been moving steadily to increase its presence in the Nigerian energy market.

"The addiction to oil is driving the foreign policy" in China, said Emira Woods, co-director of Foreign Policy in Focus at the Institute of Policy Studies.

But China's growing stake in Nigeria has wrought concerns among some that its state-run energy firms will do little to help raise the majority of Nigerians out of abject poverty or diversify the country's economy, 95 percent of which revolves around gas and oil.

"We haven't seen any evidence of that happening in other countries where China is present," Woods told United Press International, referring to Beijing's petroleum ties to Sudan and Angola.

Meanwhile, in hopes of finding ways to thwart militancy in the Delta, Nigeria has looked to China as a potential arms supplier, a role Beijing has played in several African nations.

"Selling arms to African countries helps China cement relationships with African leaders and helps offset the costs of buying oil from them," read a 2006 report by the New York-based Council on Foreign Relations.

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