West African oil gets boost from uncertainty

.... Ghana out of the equation?

Abidjan - Fears of turmoil in the Middle East have given a new spur to the scramble for Africa's oil, despite concern that a world recession could send prices tumbling.

West African crude prices have firmed compared with others after last week's terror attacks in the US, which raised the prospect of a retaliation that could destabilise the world's biggest oil producing region.

Regional analysts said the sudden rise in appetite for Africa's oil can only be heightened by further instability and showed the strategic importance of huge developments under way off the African coast.

President George W Bush's administration "had been paying a lot of attention to the region from west Africa down to Angola even before the attacks", said Matthew Bunce of the London-based Control Risks Group consultancy.

"When you add up projects in Angola and Nigeria, the Doba pipeline in Chad, Equatorial Guinea, a lot of oil is going to come from here," he said.

Key projects under way should increase the region's output capacity by 1,5 million barrels of crude per day by 2004 - bringing on stream more than Libya's current production.

The region's bulls think it would not be impossible to almost double production of about 3,5 million barrels a day within a few more years if the will is there.

That is not to say drilling oil is without problems in one of the world's most politically unstable regions.

Some spotted a certain irony in the fact that Nigeria had the confidence this week to raise prices for its Bonny and Forcados crudes, for which traders tend to factor in the danger of supply disruption by angry communities.

"West Africa seems to be the location where the concerns are far less than the Middle East," said one London trader.

Industry analysts said new developments were mostly in offshore projects - far from villages like those in Nigeria, where people demand a greater share of oil industry profits.

War-battered Angola is not a country many would see as a model, but hardened oilmen point out that crude can be kept flowing offshore despite decades of civil war on land.

Africa's geography means oil can be shipped without having to pass through dangerous straits or piped across unstable regions, as oil from central Asian exploration hotspots would have to be.

Handily, it is just across the Atlantic from US East Coast refineries, which are big buyers of west Africa's crudes.

"US policy in this region is clearly geared towards keeping good relations with Nigeria and Angola even if it has meant dropping those links it had with [rebel movement] Unita," said one western diplomat in the region.

Alongside other majors, ExxonMobil and Chevron have big and growing operations in Angola and Nigeria as well as in less certain prospects like the islands of Sao Tome and Principe.

There was also increasing interest in Ivory Coast, Liberia, Sierra Leone and regions north of that country, said Bunce.

The fly in the ointment is the price of oil and whether new developments will be viable in the event of world recession.

Bearish sentiment on future oil demand weighed further on prices yesterday. Benchmark November Brent was 40c lower at $26,87 a barrel by midday.

Oil firms, though, said some big developments left the drawing board when oil prices dipped to $10 a barrel in the late 1990s and would make money at prices well below the current level. - Reuters