It's one thing for broke Argentina to nationalize assets of just as broke Spain. However when tiny west-African country Gabon decides to "seize" assets from three international oil companies including China's petrochemical giant Sinopec, things not only get interesting, but puts a brand new pawn on the global geopolitical chessboard. But why is Gabon seeking to antagonize some of the primary participants in its crude extraction supply chain? Simple: leverage, or its own perception thereof. As the FT reports, this surprising move comes as Gabon prepares to "launch a licensing round for the deep waters off its coast. Experts say reserves in the Gabon Basin could rival deep offshore discoveries in Brazil."
So what happens next? The same as when every banana republic reverts to its banana republic stats - corporate partners are alienated, a rogue oligarchic regime proceeds to spend whatever money it has managed to steal in recent years, the government is destabilized, a military coup follows, currency devaluation, hyperinflation, economic collapse, until one oligarch is replaced with another (future) who attempts to restore relations with the same corporations that are being nationalized today.
From FT [7]:
Tensions between the industry and Gabon’s oil ministry come as a number of African countries attempt to wrest better terms from foreign multinationals and clamp down on transfer pricing and tax evasion.
Etienne Ngoubou, oil minister, told the Financial Times the government plans to reclaim the main onshore site of China’s Addax Petroleum, the Tsiengui field, when the contract comes up for renewal in 2015, due to alleged breaches of contract.
Mr Ngoubou said the state had informed two other oil companies they faced similar action. “There will be a partial reclamation of assets,” he said. “The companies have realised we have proof of irregularities. [They] have recognised their fault.” The minister refused to identify the oil companies. It is understood that neither Total Gabon nor Shell Gabon are being targeted.
The expropriated companies are understandably unhappy:
Relations between the oil industry and ministry have deteriorated sharply. Companies complain they have been forced to negotiate on licences without a new hydrocarbon code which will set investment terms. They also complain that new conditions are imposed as contracts are renewed.
There are also suspicions that the ministry’s tougher approach is motivated by a desire to reallocate producing assets to GOC, which wants to take stakes in existing and new fields. Mr Ngoubou denies this.
Many investors have also been angered by government demands for repayment of historical shortfalls in customs or tax payments, some of which date back several years. “The demands are unreasonable and unfounded,” said one executive.
In the meantime the local (transitory) government is adamant:
Gabonese ministers reject suggestions that they are putting foreign investment in the country at risk. Luc Oyoubi, Gabon’s economy minister said there was a fine line to tread between ensuring revenues to the state were maximized and encouraging fresh investment.
“The fact is there is a dilemma between the necessity of doing objective and thorough controls and the need to provide incentives for new investors. We try to have both things in mind. So the tax authorities are doing their work, we are watching what they do.”
All of this is to be expected: the offshore megacorps were well aware of the risks they took on when investing in the resources of a country such as Gabon (just ask the gold and silver miners). What is unknown, however, is how China which currently views Africa as its territorial fiefdom will respond. Since the US considers west Africa its own military protectorate (see recent drone base plans in Niger [8]) any escalation of energy-related tensions from Beijing will hardly be smiled upon by John Kerry.
Which may be long-overdue. By now everyone is sick and tired with the great proxy wars taking place the middle east - it is about time the tape started carrying some more exciting developments out of Africa. Preferably weaponized: after all, with convential credit-creation channels clogged up beyond repair, global GDP desperately needs a source of Keynesian "growth"...