Oil and Gas Production Could Be Africa's Engine for Economic Development
Regional-USA, Economics, 10/28/2003

The Western Hemisphere and Africa are important sources of oil and natural gas for the United States and their importance is likely to grow in the future, predicted John R. Brodman, deputy assistant secretary for international energy policy at the U.S. Department of Energy.

Testifying October 21 before the U.S. Senate's Subcommittee on International Economic Policy, Export and Trade Promotion, Brodman said even though the proved reserves and production of Latin America and West Africa "will never allow them to replace the Middle East in importance to world energy markets, they will nonetheless be an important source of additional supplies for years to come.

"We have learned from experience," he told the lawmakers, "that it is the marginal barrels that are the important factor in determining conditions in (helping to stabilize) the oil market," he said. "Africa is important to us because it is an important source of marginal barrels and because African oil is a key engine for economic and social development in Africa."

Over the past decade, Brodman noted that non-OPEC oil production has more than kept pace with the rise in world oil demand, thereby limiting OPEC's share of the market. Eleven countries are presently members of OPEC: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

This trend is expected to continue, he predicted, noting "Africa and Latin America together could contribute five-seven million barrels a day of additional oil (marginal barrels) to the market in the next 10-15 years."

Latin America, Mexico and the Caribbean, currently account for 10.5 million barrels per day of global oil production, he said, which could rise to 13 million barrels per day over the next decade. If Canada is added, he said, 52 percent of U.S. crude oil imports and 54 percent of U.S. petroleum product imports come from the western hemisphere. "Of the top five exporters to the United States, three -- Canada, Mexico, and Venezuela -- are in our hemisphere," according to Brodman, and those three countries account for a large percentage of the 314 billion barrels of proven oil reserves in the region -- a level over ten times U.S. oil reserves.

Brodman called the loss of Venezuelan oil supplies during December, January and February, a "serious blow" to U.S. oil supplies, and he warned that "the strike-related loss of revenue and the political climate in Venezuela, make it highly unlikely that Venezuela will be able to generate internally or attract from the outside, the revenues it needs to sustain or expand oil production capacity in the immediate future."

Conversely, Brodman said, in Mexico, there are "positive signs for the long-term. In the recent past, the current administration has come out in favor of greater private sector participation in Mexico's oil and gas development," what Brodman described as "the first positive sign of an opening in the Mexican hydrocarbon sector since nationalization occurred sixty years ago."

Turning to Africa, Brodman said President Bush has "recognized the importance" of the U.S. relationship with the continent. U.S. energy policy, he said, seeks to "promote a more receptive environment for U.S. oil and gas trade and investment and to support more transparent, accountable and responsible use of oil resources in African producer countries to enhance stability and the security of trade and investment environments."

Brodman cautioned however, "West Africa is a conflicted region that is suffering the effects of corruption, political instability, border disputes, ethnic and religious strife, governance issues, and poverty. Conflicts produce risks that have a destabilizing impact on the investment climate, on the social and economic development aspirations of the African people and on our energy security." For that reason, he told the lawmakers, "Finding affordable and effective ways to help these countries overcome these barriers is one of the new challenges to our energy security aspirations."

Democratization and the development of responsible governing institutions, he explained, are particularly important in reducing oil-related conflicts and promoting African supply stability.

"Accountability and transparency are necessary to ensure that oil revenues benefit the population and support economic and social development. Managed effectively," he said, "revenues from expanding oil and gas production could be the engine for national and regional economic development and political stability in West Africa."

Africa is currently producing in excess of eight million barrels of oil per day and now supplies the United States with about 12 percent of its oil import requirements, Brodman said, predicting that production could rise to 11-13 million barrels per day in the next ten years, or even higher if the geology and investment climates prove favorable.

Brodman called West Africa "one of the world's fastest growing sources of oil and gas. Oil production generates a large share of revenue in many African countries" with several new producers and prospective producers on the verge of entering the market.

In conclusion, Brodman touched on the natural gas situation. He predicted that U.S. dependence on natural gas is expected to rise and with that, "much of this" new demand could be met by shipments from Latin America and Africa. "Significant increases in liquefied natural gas imports from West Africa and Latin America along with new supplies from the Middle East, Russia and North Africa are likely to meet our rising demands," he said.

Previous Stories:
  U.S. issues new $20 bill featuring color, added security   (10/10/2003)
  Hewlett Packard's CEO sees huge economic potential in Arab states   (10/9/2003)
  MEPI To Create "Free and Dynamic Economies" in the Arab World   (6/27/2003)
  IEA energy ministers vow to combat oil supply disruptions   (4/30/2003)
  U.S. officials cite importance of African oil to U.S. economy   (1/30/2002)
  US calls OPEC to up production   (2/15/2000)

Please add a link on your webiste pointing to ArabicNews.com and bookmark ArabicNews.com & subscribe to our daily email news bulletin.

Search