1 February 2014

East Africa: International Interests in East Africa Resources - the Story of 'Seven Sisters'

DURING an assignment to write about international interests in East African resources, the story of the Seven Sisters came to mind. These - were- the biggest oil companies in the world which at one point sought to control the balance of power.

The companies included Shell, BP, Gulf Oil, Standard Oil of California (SoCal) and Texaco (now Chevron), Standard Oil of New Jersey (Esso) and Standard Oil Company of New York (Socony) (now ExxonMobil).

They supported monarchies in Iran and Saudi Arabia, opposed the creation of Oil and Petroleum Export Countries (OPEC) and profited from the Iran-Iraq war.

In a documentary about the Secrets of the Seven Sisters aired by Aljazeera early last year, an oil trader, Xavier Houzel, said: "We waged the Iran-Iraq war and I say we waged it, because one country had to be used to destroy the other. As they already benefit from the oil bonanza and they're building up financial reserves, from time to time they have to be bled."

In the 60s, these seven companies controlled 85 per cent of the world's oil reserves. Today, they control just 10 per cent. New hunting grounds were therefore inevitable and Africa became the natural prey. Gerard Prunier is a historian who stated in the Al-Jazeera documentary that everybody thought there could be oil in Sudan but nobody knew anything.

The existence of the oil reserves was revealed through exploration by the American company Chevron, towards the end of the 70s. "And that was the beginning of the second civil war in Sudan, which went on until 2002. It lasted for 19 years and cost a million and a half lives and the oil business was at the heart of it," Prunier said.

The second civil war in Sudan was precipitated by attempts by President Gaafar Nimeiry to take control of oil fields straddling the north-south border, according to authors Brian Raftopoulos and Karin Alexander in their book Peace in the balance: the crisis in the Sudan (2006).

Oil had been discovered in Bentiu in 1978, in southern Kurdufan and Upper Blue Nile in 1979, the Unity oilfields in 1980 and Adar oilfields in 1981 and in Heglig in 1982. Access to the oil fields meant significant economic benefit to whoever controlled them. The story of the Seven Sisters may resonate today in East Africa, albeit at a lesser level and with new players as their influence keeps waning.

And one of the newest players is China which has an insatiable appetite for energy and is constantly making new friends in Africa. China's entrance into the race for resources of East Africa has not been well received by the traditional actors, mainly because China provides soft loans to African governments which give them an upper hand in securing lucrative contracts and deals in the extractive industry.

In Tanzania, it is estimated that there are 42 trillion cubic feet of recoverable natural gas reserves in the southern regions. Discoveries offshore of Tanzania and Mozambique waters have led to predictions that the region could become the world's third largest exporter of natural gas and naturally, investments are pouring in.

The Chinese government was quick to dish out a loan worth 1.2 billion US dollars to Tanzania to construct a 532 kilometres pipeline that links Mtwara gas fields to Dar es Salaam and construction of the same is in good progress. But construction of the pipeline led in May last year to major protests in Mtwara where 18 people were injured and 91 were arrested and the government had to call in the army to quell the unrest.

Some Members of Parliament then suggested that foreign elements could be at play in the chaos over who gets to control the gas supplies. One MP was quoted as saying: "It could be China that is being fought in the Mtwara saga as some global powers are out to show China that they can thwart any project that is not in their interest."

That only goes to show the farreaching consequences of international interests to local host communities. In both the gas and oil and mining sector, international firms have had massive influence in the decision making processes of host nations.

The extractive industry is an expensive area to invest in, thus governments in the region largely depend on companies with the necessary capital in terms of finances, human resources and technology for large scale investments.

In turn, multinational investors in the extractive industry use that as a bargaining chip and exert influence on how policies are shaped in host nations, mostly in their favour. Furthermore, minerals and gemstones being extracted in East Africa are always exported. It is thus multinational firms, which are only out to do business, that determine prices.

The Tanzanian government, as a way of mitigating the effects of bad policies in the mining sector and avoiding to repeat similar past mistakes, enacted the National Gas Policy 2013. The policy, among other things, established the National Gas Reserve Fund which is expected to act as stateowned investment vehicle to ensure that citizens benefit directly from the profits of natural gas.

Apparently, the government does not want to take all the money from the gas sector to the Treasury as was the case with the mining sector, which led to the public believing that mining had contributed nothing to their lives, the former Deputy Minister for Energy and Minerals, George Simbachawene had been quoted as saying. The new policy also seeks to create a national oil and gas company and encourage local participation in the industry by ensuring that Tanzanian companies and citizens provide services to the industry.

It also seeks to promote joint ventures between Tanzanian and international investors and encourage ownership of oil and gas companies through issued shares. Yet as a country, many failures at reaching development goals have been blamed on misplaced priorities and scanty self-interests.

Desta Mebratu, United Nations Environmental Programme (UNEP) Deputy Regional Director: Regional Office for Africa noted that Africa has not benefitted from its mineral wealth. The African mining sector has been run as an isolated enclave and not linked to the broader national economy. Hopefully, the same would not have to be said about natural gas in Tanzania.

On paper the touted benefits of the new policy are promising. But the management and oversight of the fund and implementation of the policy in general is yet to be put to the test

Copyright © 2014 Tanzania Daily News. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.