Black Gold: Will African Oilfields E&P Yield Profits or Death?


"What will resource boom bring to Africa? Wealth, happiness or death?"

As the sun leaks slowly over the African horizon, an ominous cloud of uncertainty continues to swirl. Facing global resource shortages and increasing shareholder expectations, major corporations from China, Russia, France, Germany, and many other European, Asian, North, and South American nations, continue to push aggressively onto African soil through acquisitions and joint venture investments. Unfortunately, while the current World Cup has showcased a continent poised for greatness, the environmental devastation witnessed over the last 50 years from mining, drilling and harvesting operations in countries such as Nigeria is squalid. Oil spills, gas flares and poisonous runoff have decimated the African ecosystem and brought billions of dollars of irreparable damage to the African continent and its people. One region that has suffered immensely is the Niger River Delta. Over the last 50 years, corporations have pillaged and exploited the Delta's resources, operating with impunity. As resource industries prepare to expand aggressively within Africa, important questions must be asked. What price are we willing to pay for economic growth? What costs should investors factor in when calculating risk in highly deregulated and undeveloped markets? When accidents happen, why is remuneration between emerging markets and developed nations so disparate? And finally, what will the proposed resource boom bring to Africa? Wealth, happiness, darkness or death?

From an investment perspective, it is not difficult to realize the important role African nations have in the global oil, gas and commodities sectors. With 606 oilfields, the Niger Delta in Nigeria supplies 40% of the United States crude oil imports. Nigeria, which vies with Angola for Africa's top oil producer, is the fifth-biggest source of U.S. oil imports, and a critical U.S. trading partner.

Since oil extraction began in 1958, Nigeria has generated over $600 billion in oil revenues.

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