Accessibility links

Mauritania Set to Join Club of African Oil Producers


Mauritania is set to join the club of Africa's oil producers, but before any crude has started flowing, uncertainty already surrounds the lucrative and often disruptive resource.

Several technical problems have already delayed the ceremonial opening of Mauritania's Chinguetti offshore oil field, now tentatively scheduled for Friday.

Initial exports will not begin until late March, but if they do, the field is expected to yield about 75,000 barrels a day of sweet crude for 10 years. This would immediately make Mauritania the 10th biggest oil producer in Africa, behind Cameroon and ahead of Tunisia.

Mauritania's military government has predicted oil riches in 2006 will push its economic growth rate to more than 20 percent, and boost state coffers by up to $300 million. In an impoverished country of three million people, that could help development.

The government has already received a $15 million cash bonus and $130 million loan from a British-based company, Sterling Energy.

But, before it joins the oil-producing club, the government is also having problems with the Chinguetti field's operator, the Australian company, Woodside Petroleum. The government wants to rework amendments to production sharing contracts, which it says, were signed outside the legal framework of normal practice.

The former energy minister, responsible for the deal, was arrested and charged in January for serious crimes against the country's economic interests. Court proceedings against him began this week.

These developments could be worrisome for future investors, according to Ian Gary, a Washington-based oil expert with Oxfam America.

"Oil companies are interested in investing in countries where they know that their investments are secure and that the rules of the game are not going to change every other year or with each successive new government and so there are definitely risks to the strategy but it is also important that African countries are able to renegotiate a fair deal on behalf of their citizens," he noted.

But big companies like France's Total are already lining up to develop other Mauritanian oil fields, including two land areas in the northeast of the country. Two off-shore sites Tiof One and Tiof West are believed to have up to 400 million barrels worth of oil.

Oil officials hope that in three or four years time, Mauritania could be one of Africa's top four producers, behind Nigeria, Angola and Equatorial Guinea.

Another analyst, Olly Owen, with the London-based group Global Insight, says it is important that before Mauritania goes any further with new partners, it starts establishing a good, legal framework.

"The real key in terms of it being a mutually beneficial relationship is to have a regulatory environment that's solid. That means for investors that they are not going to trip over these kinds of disputes that Woodside are now engaged in with the Mauritanian government because it should all be clear when the deals are made on the table," said Owen.

"And for Mauritania it also means that it will have to lead to a transparent government in effect so that people know, the public knows, where the funds are going, how much is coming in, how it's going to be used," he continued. "So it's really a matter of getting a regulatory environment solidly set up and that is a concern that the IMF has recently expressed as well with regard to Mauritania."

The military government has made promises of ensuring oil wealth helps the poor, and that elections next year will bring democracy.

But when oil and big money stakes are involved, the analysts warn, promises have to be tracked carefully. Since Chad started exporting oil in late 2003, they point out, President Idriss Deby had the constitution changed to run for a third term, while gutting World Bank arrangements to guarantee oil funds for poverty alleviation.

XS
SM
MD
LG