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New Oil Revenue Could be Mixed Blessing for West African Countries

West Africa's emerging potential as a major oil producer has raised hopes of increased economic development in the poor countries of the region. But the prospect is worrying human rights activists, who say oil revenues often create more problems than they solve.

Industrialized nations are always looking for new sources of oil to keep prices low and reduce their dependence on the traditional oil-producing nations of the Organization of Petroleum Exporting Countries.

West Africa is the latest focus of that effort. Oil industry consultant Tim Zoba says the region offers Western countries short shipping routes, quality untapped oil fields and few market restraints. And he notes that in West Africa, only Nigeria is a member of OPEC.

"The U.S. government would obviously like to see much more emphasis on non-OPEC sources of crude oil," he said. "West Africa has the combination of being able to get in, being able to do deals and explore, and of course the key factor has been the large discoveries that have taken place there."

West Africa already supplies about 12 percent of U.S. crude oil imports, and the U.S. National Intelligence Council says this share could rise to 25 percent by the year 2015. Nigeria is the world's sixth largest oil exporter, and nearby countries, including Gabon, Cameroon and Equatorial Guinea are making gains.

Farther north, landlocked Chad is about to become Africa's newest petro-state, when it begins oil production in July. A 1,000 kilometer, $4 billion pipeline is being built with help from the World Bank to link oil fields in southern Chad with a marine terminal off Cameroon.

Also in West Africa in the Gulf of Guinea, the islands of Sao Tome and Principe are believed to be surrounded by large oil reserves. Bidding has already started to develop off-shore areas jointly owned by Nigeria and the islands.

A leading human rights proponent in the U.S. Congress, Representative Donald Payne, says he hopes local people will be able to benefit from West Africa's expected new oil wealth. This has not happened in Nigeria, where despite $300 billion in oil revenues over the past 25 years, poverty has increased in the country's oil-producing regions.

"Oil finds in Nigeria led to military takeovers, it led to a lot of conflict between the people where oil came from, and from others who had more power," he said. "And we should not fall into the same trap as we've seen in other oil-producing countries in Africa."

Congressman Payne says western governments should tie investments to respect for democracy and human rights.

The United States is preparing to reopen its embassy in Equatorial Guinea, where oil revenues have boosted economic output by an estimated 60 percent over the past two years, mainly due to recent U.S. investment. At the same time, the small West African country has been criticized by the U.S. State Department for its poor human rights record.

The U.S.-based aid agency Catholic Relief Services released a report this week on the many challenges of West Africa's oil rush.

"We really see this as a key moment of both great opportunity but also great peril. In the past, Africa's long-term exporters, as well as other oil exporters around the world, have had very poor track records in turning oil revenues into reducing the poverty of their people," said researcher Ian Gary, who worked on the report. "We see this moment in Africa as one of opportunity to change that track record of what is often termed as the paradox of plenty."

Mr. Gary is calling on oil companies to play a role in helping ensure that oil revenues are fairly distributed in the countries where they invest. "When it comes to the international oil companies we believe that the most important thing they can do is publish what they pay African governments, that's the revenues, the taxes, any kind of royalties that oil companies pay national governments, these need to be transparent," he explained. "It's awfully hard for local civil society groups to hold their own governments accountable on how oil money is spent when they don't even know the figures involved, so that's a key recommendation in the report."

Mr. Gary says African governments, foreign governments and financial institutions also share in the responsibility to create more of what he calls "revenue transparency."

He adds that Chad offers a good test case, because all sides in the project are being scrutinized. Under pressure from the World Bank, Chad's government has put in place oil revenue management laws, automatically directing oil benefits to health care, infrastructure and education.

But earlier this month, the chairman of the U.S. Congress' Africa subcommittee, Ed Royce, said the Chadian government had allocated about a fifth of a $25 million oil payment for its defense budget. And Congressman Donald Payne, who is also on the Africa subcommittee, says there could be violence over oil revenues in Chad between the militarized north and the oil-producing south.

U.S. lawmakers and human rights activists say they will use their leverage to try to convince governments, financial institutions and oil companies that it is in the interest of all for West Africa's newfound oil money to reach the many, rather than just the few.