Governments all over the world lose billions in revenue from corporate tax evasion every year. In many instances, citizens in a country pay a proportionally higher rate of tax than multibillion dollar companies.
Despite this being a global pandemic, Africa suffers more than most.
While delivering his Nelson Mandela lecture in Johannesburg, Sudanese-British mobile communications entrepreneur and billionaire, Mo Ibrahim, said more money is lost from multinationals not paying tax, through what he calls fancy accounting, than gained from aid.
“Physics and numbers don’t lie, but people do,” he says.
The continent is blessed with resources: Oil in Nigeria; gas and mineral reserves in Botswana; Angola, Ghana, and South Africa; the Democratic Republic of Congo has diamonds and cobalt; Mozambique has natural gas. These resources alone could lift millions of Africans out of poverty.
Former United Nations secretary general, Kofi Annan, wrote that the continent loses a huge amount of money from the use of shell corporations, offshore companies and tax havens by multinationals which often divert their profits.
But Dylan Buttrick, an associate at Norton Rose Fulbright South Africa begs to differ—slightly.
“It is important to understand the distinction between aggressive structures that facilitate tax evasion, and corporations that have tax efficient structures as a result of tax planning. In a world of increased globalization and multinationals, offshore structuring and tax planning is to be expected and remains legitimate,” says Buttrick.
The lack of infrastructure and resources makes it difficult for tax authorities to track payments. Revenue authorities would benefit from more sophisticated collection systems and processes that would help these authorities in enforcing compliance.
According to The Elders, an independent group of global leaders, transfer pricing—the practise of shifting profits to lower tax jurisdictions—cost Africa $38.4 billion every year, a number which Buttrick says is difficult, if not impossible, to quantify.
He says in recent years, African authorities have increased their focus on compliance with transfer pricing.
Buttrick further says the practise in the market is to ensure that transfer pricing policies comply with the South African tax laws, this despite significant chances in recent times, leading to a perceived uncertainty in some circles.
“Most multinationals do not indulge in invasion, i.e. fraudulent reduction of their tax, but may reduce their taxes in a particular jurisdiction through the use of legitimate tax planning tools, but beyond what certain politicians or even the public may deem appropriate,” says Buttrick.
Buttrick says from an exchange control perspective, South Africa’s banking and reporting system is fairly sophisticated and cross-border payments are easily monitored. The inflow and outflow of capital from the country will need to comply with exchange control regulations.
The G20 plans to fight international tax evasion by multinational companies. They will exchange tax information and support the Organisation for Economic Cooperation and Development (OECD) in its plans to prevent multinational companies from avoiding tax by moving profits across borders. The new rules would force companies to pay tax in the countries where they make their money, instead of where the tax rate is the lowest.
Companies like Google, Apple, Amazon and Starbucks are reported to have perfected the art of using loopholes within tax regulations. MercoPress reports that these firms argue that they are doing nothing illegal and have a duty to shareholders to minimize tax payments to maximize profits.
The OECD says that some of the existing tax rules, created in the 1920s, were designed to avoid double taxation of companies operating in more than one country. But this is haunting the industry nearly a century later as these same rules are being used to create double non-taxation.
The G20 leaders agreed to an unprecedented deal to share information on individual taxpayers. They plan to start exchanging information on tax matters among G20 members by the end of 2015.
David Cameron, the British prime minister, says the new tax rules state that only advanced nations will sign on the deal, but it’s important that developing countries participate in sharing tax regulations.
Reforming the outdated global tax framework needs to occur, with governments across the globe working together. Regardless, one question still bothers me: should multinationals be taxed on the basis of where they are doing business or on the strength or weakness of their lawyers?

“Numbers Don’t Lie But People Do”

Another answer to Africa’s energy shortage could be sitting thousands of meters off the south coast of the continent. Its extraction could cause a row between interested parties.
British company, OK Energy Limited, is on the hunt for potential oil and gas energy (hydrocarbon) reserves in the East Algoa Exploration Area, under the Indian Ocean. The area is off the eastern coast of Port Elizabeth and is 9,314km² and reaches a depth of approximately 4,000m.
OK Energy appointed a South African company, Environmental Resources Management (ERM), to prepare the environmental management program for Petroleum Agency South Africa (PASA) ahead of consideration and approval by the government.
OK Energy submitted two applications to PASA between March and August as per government’s licensing requirements. A decision is expected before the end of the year. If the bid is successful, it will add to the existing exploration of ExxonMobil reserves in South Africa and the Great Rift Valley in Kenya.
The applications included a consultation process. According to ERM reports, community meetings and an environmental program were required. These activities involved the evaluation of the environmental and social setting, identifying potential impacts and developing a plan to reduce them. The company received approval to go ahead with seismic processes in 2014.
“For the East Algoa Area, currently there are no outstanding stakeholder issues and the process is likely to lead to PASA granting the exploration right later this year. We would then look at acquiring seismic data, either in conjunction with another operation in 2013, or our own in 2014,” says Paul Barrett, OK Energy’s director and geologist.
“South Africa will benefit from significant tax and royalty revenues—the local area, especially Port Elizabeth’s port, will benefit from a large amount of fabrication and support activity to build and operate any oil field development.”
“The geology of the coastal region suggests that deepwater oil reservoirs may have been deposited. This is totally unproven and ourselves and Impact/ExxonMobil, our neighboring licence holders, are using worldwide analogues to drive our exploration focus. It is a high-risk area in terms of finding hydrocarbons, but if it works it will be significant,” says Barrett.
“The rights to all of South Africa’s oil resources should be given to PetroSA because it’s state-owned. There’s no guarantee that oil will be cheaper because it’s being sourced from our oceans,” says Bobby Peek, director of a non-governmental organization Groundwork.
Peek, an environmentalist, also warns that the seismic activities in the oceans could drive dolphins and whales away.
PetroSA has proposed an amendment bill to Parliament, which significantly widens the scope of state involvement in mineral production, making it the custodian of the state’s allocation for all petroleum rights.
This has led to a backlash from the industry’s interested parties, like ExxonMobil and Anardako, with warnings that the proposed amendments could deter investment in South Africa at a time when prospects for gas and oil discoveries are good.

Energy Under The Waves

When you walk off the main street in Graaff-Reinet and into Derek Light’s office he has to talk to you over a mountain of files. The small-town lawyer, who is taking on a number of the world’s largest energy companies, apologizes for the mess and very carefully moves his pile of lever-arch folders onto the floor. Scribbled on the spines with blue marker pens are the names Falcon Oil and Gas, Bundu Oil and Gas, and Shell.
“I have another eight cabinets full, all to do with fracking,” says Light.
It could have been a quieter twilight of his professional life in the Karoo, when he moved back to his hometown to raise his two children. It could have been measured days of drawing farm-owners’ contracts and settling disputes over wandering sheep. Now he has to tackle big businesses and its threat to turn his backyard into one giant fracking well pad.
“The problem is that the process of explorative fracking is not normal. It’s invasive and has the potential to destroy the environment,” says Light.
“Things like land, air and water are emotional subjects. In Britain, we’ve seen people super-gluing themselves to fences and being incarcerated for wanting to prevent the development going ahead. Those are extreme conditions. People act in that way because they don’t have any other way of resisting. They don’t have the means of accessing the courts and employing the scientists and economists,” he says.
According to Light, fracking will change the face of the Karoo.
“If the reserves are there and you go into well fields, you won’t recognize the country. You will have well pads every 5 kilometers in every direction. You will have flaring, false lighting, masses of vehicles on the road. The air quality will deteriorate. The effect is massive.”
He disagrees with the suggestion by Shell and others that it won’t.
“They will be using multi-well pads, with 30 wells on one site. The point is that rock formation needs to be targeted as broadly as possible; if you can only drill horizontally you would have exhausted the rock within 2.5km. You would have to establish another well 5km away.”
The legal costs to fight fracking have been daunting.  Until November 2011, Light was by himself with hardly a budget at all. It was light at the beginning of the tunnel for the lawyer.
“Now there is a big team of councillors, scientists and environmentalists. It would not have been possible without the help of  Africa’s third richest man, Johann Rupert. He made it possible to get the expertise of people to take on the biggest companies in the world like Shell,” he says.
The lawyer has no problem taking on the big guns of the fossil fuel industry. He believes that if you are standing on the right side of the law you can take on anyone, no matter how deep their pockets are.
Light also put his own money on the line.
“I know as a professional you have to be objective, but in this case it is my whole community that is being threatened. I want to keep what we have here, it’s a great environment to bring your family up in and it should never be destroyed,” he says.
“I try not to get caught in that sort of emotional debate because it clouds your own judgment. But I can only achieve what I have set out to achieve with the support of individuals. We have just been very lucky that we have sufficient access so far.”
One of his biggest worries is not enough people know about fracking to make an informed decision. According to Light, most people in the cities do not understand the impact this will have on the countryside.
“I remember about two years ago, of all people interviewed in the urban areas, only 50% knew about fracking and of them 15% knew what fracking really was. So I think it’s a question of if it doesn’t affect you nobody cares.”
“It’s moving as quickly as the oil and gas companies are allowed to move. And we’ve said no. We didn’t make the same mistake that the United States made. They allowed it to happen and then tried to regulate it,” he says.
At a time when most people are looking to retire, he looks set to become a household name.
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<h4>The world refuses to frack down</h4>
From London to Perth people have been fighting police, clashing with truck drivers and super gluing themselves to fences all for the same reason—fracking. In South Africa the debate is still in its infancy. Fracking in Australia, Britain, Bulgaria, Canada, China, Denmark, France, Germany, Ireland, Netherlands, New Zealand, Poland and the United States has provoked violence. In France it was banned completely, Tunisia soon followed.
One of the most violent protests came in a small town in West Sussex, Balcombe in Britain. British oil and gas exploration firm Cuadrilla, built a test well to take samples of rock.
Protestors super glued themselves to fences. The 1,000 protestors also set up camp by the road to the site. In August, police moved in to evict them and it was reported to have cost tax payers £3.7 million ($5.8 million).
In September, Cuadrilla announced it would suspend operations until a new planning application had been approved. Its drilling rig was moved to look for oil elsewhere.
“The drilling rig and associated equipment will be removed from site in September and testing equipment will not be mobilized to site until planning consent has been granted,” says Francis Egan, CEO of Cuadrilla in a statement.
On the other side of the coin, in North Dakota, United States, oil-fracking is seen as a boon. From 2005 to 2011, it helped the state’s economy grow from $4.4 billion to $30.5 billion. Eight thousand wells, producing more than 820,000 barrels a day was just the start. These wells are expected to increase to 50,000.
Among the landowners of North Dakota, 2,000 new millionaires are made every year, according to Bruce Gjovig, founder of the Center for Innovation at the University of North Dakota. Oil royalties range from $50,000 to $100,000 a month.
The quest for oil has drawn in thousands from across America to towns such as Watford City, which has grown from 1,700 to 10,000, according estimates in March.
The fracking revolution has been bitter sweet for some. Many long-term, low income residents have been priced out of their homes through property price rises. The population boom has led to overused roads, polluted streams and created the worst aspects of urbanization.
In South Africa, residents of the Karoo are the latest to join the battle. According to Julius Kleynhans, head of environmental affairs at AfriForum, the biggest problem is only one in five South Africans have heard about fracking.
“At the moment the government is doing nothing. It’s refusing to address the public outcry. They are just power drilling their wants through,” he says.
“Why would they care if the Karoo was contaminated? What they were told was the value of getting this energy game-breaker gas was far more important than the value of the Karoo. The fact that the Eastern Cape has a third of the country’s livestock population; I cannot tell you how important this part of the country plays in production. We also produce more wool, mohair and ostriches than any other part of the country and 25% of the citrus in the country,” says local farmer Doug Stern.
You can be sure this time next year many more Africans will know what fracking is and how it could change their lives.
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Light At The Beginning  Of The Tunnel

In the 1800s, Europeans referred to Africa as the “dark continent”, although the Victorian term has fallen from usage, until recently it accurately described the approach of foreign investors to Africa. Risk was thought to be too high, returns too low. A decade ago, the region’s share of FDI was less than one-tenth of the amount flowing into Asia or Latin America. Until a few years ago, a single company, Exxon Mobil, was worth more than all of Africa’s listed companies put together, excluding those of South Africa.
But what a difference a few years can make. Since the financial crisis hit in 2008, there has been a dramatic shift in how investors view Africa. One of the markets that has best epitomized this change is Ghana.
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The West African county was near the top of worldwide tables in 2011 in terms of GDP growth with a rate of more than 14%. 2012 figures were equally robust, coming in at above 8.5% buoyed by strong growth in the non-oil sector of 8%. While the country is largely dependent on commodities for export revenues, increased activity in housing, construction and banking has spurred an expansion of the services sector, which makes up more than half of GDP.
Last year saw a gradual depreciation in the cedi, which fell by around 14% against the dollar, driven by increased demand for imports. While the country’s robust growth also stoked inflationary pressures, at least over the short-term, the CPI fell to 8.8% in December—its thirty-first consecutive month of single-digit inflation.
The country benefited from a statistical rebasing a few years earlier, which dramatically improved data collection and accuracy. As a result, the country was catapulted into middle-income status.
The biggest recent watershed moment for the country is as a result of its newfound oil and gas reserves. The offshore Jubilee field, discovered in 2007, began production in record time, with the first barrel being lifted at the end of 2010. The speed with which Ghana went about capitalizing on its new oil wealth, 42 months from discovery to production, led to a few hiccups. For four months, light, sweet crude flowed without a regulatory framework to determine how the revenue would be channeled and how future production would be handled. Eventually, the Petroleum Revenue Management Bill was put in place. It allocates a proportion of revenue to future generation funds and price stabilization funds and some $444 million worth of oil revenue flowed into government coffers by the end of 2011. The production, in relation to the country’s overall economy, is modest and by some estimates will work out to around $50 per capita annually but the rush of investment into the sector—and ancillary industries, such as construction and services—helped ensure the country was one of the largest FDI destinations in Africa last year.
Associated gas deposits in the field brim with equally promising potential, particularly in terms of domestic industrial and electricity production, although timing has been problematic. Currently, with a ban on flaring and no offtake infrastructure, gas has been re-injected into the deposits but at a certain point this will negatively affect oil production. As a result, the country has been racing over the past year to finalize infrastructure for its gas master plan, which will see the construction of more than $750 million worth of new processing and pipeline infrastructure by China’s SINOPEC. Gas is due to begin flowing to the newly-built Aboadze power plant over the next month or two—and none too soon, given the blackouts last year when the country’s alternative gas supply, the West African Gas Pipeline, experienced supply shortages.
While hydrocarbons dominate the headlines, Ghana’s traditional commodities have provided the bulk of revenues in recent years. Cocoa, which indirectly supports more than one-sixth of the population, had a successful year with an estimated production figure of 860,000 tons, down slightly from the previous year but enough to make it the world’s second largest producer. The distribution of more than 20,000 new hybrid seedlings and efforts to improve the ability of small farmers to tend and replace their crops, looks set to strengthen output over the medium-term.
Similarly, gold, which accounts for roughly 40% of exports, grew by double-digit figures over 2012. Although production fell slightly, higher prices on international markets helped keep prices afloat and fund new exploration in marginal deposits. Ghana has revamped its regulatory scheme, introducing a new bidding system and increasing the fiscal burden for operators, including a windfall tax and higher royalties.
Of course, with all this laudable growth comes a note of caution. This rapid change must be managed carefully, for the downside risks facing the country are sizable. Ghana was the third-largest recipient of FDI in Africa last year, but it remains worryingly dependent on commodities. Gold, cocoa and oil dominate exports and while Ghana is not as sensitive to price fluctuations as it was in the 1980s, when the economy seesawed according to international prices, volatility still impacts overall performance. Furthermore, labor-intensive activities such as manufacturing remain marginalized, exacerbating unemployment and weakening the balance of payments. The benefits of the economic boom have been disproportionately concentrated in the south and development in the north lags significantly.
However, Ghana has the ideal foundation for future growth. It has natural resources, policy stability and reasonable infrastructure and it has benefited accordingly. But exporting raw materials, by sending gold and cocoa elsewhere for processing, is a short-term solution. The country has begun aggressively encouraging increased value-added production in the secondary and tertiary sectors, to improve the sustainability and inclusiveness of growth and to ensure that the country’s current performance is not a temporary blip.

Gas And Cocoa Oils Ghana Growth

The South African government has taken a big step towards fracking in Africa’s biggest economy that is likely to lead to months of heated debate and court battles.
Hydraulic fracturing, or fracking, involves extracting natural gas from shale rock layers deep within the earth. The process requires vertical and horizontal drilling and the injection of pressurized fracking fluids, water and sand to extract the gas.
Oil companies see fracking as a potential boost for energy exports, jobs and foreign investment. Conservationists argue it will destroy ecosystems found in the semi-desert landscape of the Karoo, where much of the shale gas is located.
On April 29, 2011, the minister for mineral resources, Susan Shabangu, placed a moratorium on applications to explore fracking in the Karoo while her department conducted investigations. That ban on exploration was lifted on September 7 and the Investigation of Hydraulic Fracturing in the Karoo Basin of South Africa report, which the cabinet based its decision on, was released four days later.
Derek Light, an attorney for farmers in Graaff-Reinet, was unhappy with what he called a hasty decision to lift the moratorium.
“The task team could not have effectively performed its function in such a short a time. It should have performed a strategic environmental assessment in the broadest possible terms which would have enabled them to make a well-informed decision that would be in the best interests of the people of this country,” says Light.
Light was pleased to see that the report recognized the importance to revise the country’s regulatory framework, in order to control fracking.
Jonathan Deal, chairman of Treasure The Karoo Action Group—the official opposition to fracking in South Africa—says that the country’s first reaction was “let’s frack” instead of investigating other forms of energy.
“There is natural gas, offshore, in reservoirs which do not need to be fracked in order to remove it,” he says.
“We plan to lodge an appeal if and when exploration licenses are issued,” Deal says.
Ferrial Adam, a Greenpeace Africa climate and energy campaigner, also believes that the country should consider other forms of sustainable energy.
“Greenpeace’s research on ‘Advanced Energy Revolution’ scenarios shows that it is possible to create 50% of electricity from renewable energy by 2030, if we have the same political determination that government seems to put into fossil fuels,” she says.
Adam says that in a dry country like South Africa this decision by government is short-sighted.
“Contamination of groundwater aquifers and surface waters can occur due to fracking operations and through the disposal of waste waters. Small amounts of carcinogenic hydrocarbons are harmful to humans. In some cases, this waste water is minimally processed before being dumped into surface waters feeding public water supplies, or is held in ponds that may lead to releases of the chemicals into the environment.”
The head of Living Planet Unit, WWF South Africa, Saliem Fakir, says we can only see the outcome of fracking by looking at extractive industries at present. The track record for communities is rather dismal. The national coffers and private industry may benefit but the problem of impoverishment could be the inheritance of the local setting. Fakir pointed to countries like Nigeria, a country where Shell is active, to show how countries that are rich in oil can be poor.
“Extractive industries have boom and bust cycles. They often attract lots of labor and people from outside that leads to conflict, social pressure and displacement of local interests, the truth is that resource rich countries tend to have high levels of inequality. Elites tend to capture the rents and leave out the poor. We may see a similar phenomenon with shale gas if the extractive process suffers from poor governance and oversight,” says Fakir
Bonang Mohale, chairperson for Shell South Africa, was pleased with the details of the report.
“The suggestions made by the task team are in line with our exploration plans for the Karoo Basin,” says Mohale.
“South Africa needs energy now. Approximately 10 million people in South Africa do not have access to electricity. At the moment, South Africa is a net importer of energy. This means that South Africa needs the full range of energy sources. In combination with other energy sources, including renewables, gas could help secure South Africa’s energy future, while creating sustainable and permanent jobs for South Africans.”
Shell is preparing to submit a comprehensive environmental, social and health impact assessment (ESHIA) that is in line with the National Environmental Management Act. Shell promises to continue working closely with the people of the Karoo and South Africa to address concerns and ensure that they benefit from shale gas exploration.
Group Media Manager for Sasol Limited, one of the biggest energy companies on the continent, Alex Anderson, says that Sasol gave up its fracking license last year.
“We concluded an extensive technical study of the area and then decided not to pursue further exploration activities in the assigned TCP area. The decision was based on subsurface technical and operational considerations and was unanimously taken by the partnership,” said Anderson a few months back.
“Sasol has taken note of the decision by the South African government to lift the moratorium on shale gas exploration in the Karoo region. We continue to be very interested in the upstream oil and gas business landscape, which includes the shale gas in the Karoo and elsewhere. As a consequence we continue to monitor these developments with interest and if new opportunities present themselves we will actively evaluate and pursue if they are attractive from a technical and commercial perspective,” says Anderson.
The report commissioned by the department of mineral resources indicated that during the exploration phase, only normal exploration, would be allowed. This excludes hydraulic fracturing but instead includes a process whereby drilling, geophysical and geochemical mapping can take place.
The report spoke of the economic potential fracking would bring to the country. According to the United States Energy Information Administration there is an estimated 485 trillion cubic feet (Tcf) of gas in the Karoo Basin, which could reduce the national dependence on other fossil fuels. It mentioned the environmental and socio-economic implications of water use. and the disposal of the fracking fluids. The task team said that due to the high volumes of water to be used and the possible contamination of water with the fracking fluids, they would need to conduct further research into water sources.
The report called for aa re-evaluation of South Africa’s regulatory framework to ensure that any possible negative impacts would be alleviated. A monitoring committee will be appointed to ensure a comprehensive and coordinated framework and the supervision of operations.
Now the conservationist and protestors await the application for the first exploration license and will see the applicant in court.

Between A Rock  And A Hard Place

Shell applied for gas exploration rights for an area covering 90,000 km2—the size of KwaZulu-Natal. Falcon Oil and Gas applied for an area of 30,000km2—one-and-a-half times the size of the Kruger National Park—which encompasses Jansenville, the mohair capital. Sunset Energy applied for 35,000km2 around Graaff-Reinet. Besides these, there are many more; together they cover an area the size of the Eastern Cape Province. It could be the world’s fifth largest shale gas find.
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According to Jansenville, Sasol is not pursuing further exploration, after initial studies of the Karoo “did not reveal particularly strong prospects”, although it remains interested in the venture. “[It] supports the current moratorium on additional license applications” which allows the government “to define the robust and world-class regulatory environment that is critical for the responsible functioning of shale gas exploration and operations”. Sasol was awarded a technical co-operation permit of 82,145km2 offshore Kwazulu-Natal and might apply for exploration rights after the year-long study period.
Econometrix, South Africa’s largest independent macro-economic consulting firm, reports: “Just 10% of the US Energy Information Administration (EIA) estimated 485 tcf (trillion cubic feet) shale resource could add R200 billion ($24 billion) to GDP annually and create 700,000 sustainable jobs.”
Jan Willem Eggink, general manager upstream of Shell, says: “The hundreds of thousands of jobs are only generated if we are producing the gas and it goes into the market where new industry will start. The exploration phase will not generate a very high number of jobs because the skills are not yet here. We will have two rigs: each rig will have 50 to 100 people, possibly slightly more; it depends on the rig.”
PASA believes that only 10% of the estimated reserve is viable for exploitation. Eggink believes that Econometrix’s case studies on 4% and 10% of the gas reserves are “conservative cases”.
“The bottom line is we have to drill wells to actually find out whether the shale [is] there and can be productive,” says Eggink.
South Africa imports 65% of its natural gas from Mozambique. This could be the solution to the country’s dependence on foreign energy.
“The National Planning Commission (NPC), headed up by Trevor Manuel, outlines the challenges for South Africa which are inequality, poverty, unemployment, education and energy. I think these have to be resolved in the foreseeable future. If not resolved, I think there is a huge problem for South Africa. This project provides an opportunity to address many of these issues listed in the NPC report,” says Eggink.
“If you have sufficient energy in a country, then industries will build, employment will rise appropriately and through that, education will also get a boost because if you have significant employment opportunities these people need to be educated.”
Shell has conducted public participation meetings in the Karoo and Cape Town, he says.
“The Environmental Management Plan (EMP) we submitted has the most extensive consultation any project has had in South Africa so far. We had, I don’t know, 6,000 questions which we have all answered individually. They are published on the Golder Associates website, which is an independent entity.
“With regard to environmental impact, the footprint of the development will be very small. First of all, we will explore, and we will explore up to 24 wells in accordance with the EMP in our area. These drilling rigs will end up on a football pitch-sized area. After that we may go into development, and nowadays, on this football pitch-sized areas [you can place] up to 32 wells. One development could be between 1,000 and 2,000 wells which would mean, with these horizontal wells, that you would need 60 or 70 of these football pitch-sized areas, four to five kilometres from each other. That is one development.
“That will be a pretty small area, compared to our license area. We will be operating in 1% of the area for development, and at surface the impact will be significantly smaller than that 1%.” FORBES AFRICA calculates it to be 900km2.
When it comes to water contamination by fracking fluids and gas, Eggink quotes the April 2012 report on The Environmental Impacts of Shale Gas and Shale Oil Extraction Activities, by the Committee of the Environmental, Public Health and Food Safety of the EU.
“It is important to note that no official or other reputable sources have demonstrated any systematic [connection] between shale gas and shale oil extraction and human and animal health. No official or other reputable sources worldwide have demonstrated any cases where hydraulic fracturing has led to contamination of drinking water.”
Eggink quotes one case, which is currently being disputed, in Wyoming. It relates to the poor quality of wells, which he assures will not be the case with Shell as it adheres to high operating standards.
All the chemicals to be used will be disclosed on Shell’s website. Eggink claims that from a list of a few hundred possible chemicals, only 8 to 10—on occasion slightly more—are used, depending on the rock mechanics of the site to be drilled.
According to Econometrix: “At depths of 4,000 to 5,000m below the surface where the shale deposits are expected to be found, any water in the vicinity or between the surface and those depths is likely to have been rendered unusable through natural contamination with arsenic and uranium.”
Chapter 10 of Shell’s EMP outlines its commitments to ensure minimum environmental impact and adhere to safety regulations. The most salient points include: full compensation to landowners with proven direct negative impact or loss due to their activities. Shell won’t compete with locals for water and will monitor water quality through an independent party. It will employ local experts to identify the most suitable water source for development areas. Shell promises to recycle flowback water and responsibly dispose of remaining fluids. It promises that permanently plugged and abandoned wells will adhere to the highest international practices.

Don’t Panic, We’re Just Looking For Energy

Ilha de Luanda, the tongue of land that stretches out into the sea from the bay of the Angolan capital, is littered with palm trees, upmarket beach clubs and restaurants. This is where Pedro Godinho started selling ice cream during Angola’s civil war, when the island was a clean, peaceful getaway from Luanda’s crowded chaos.
Godinho’s company, Prodiaman, is headquartered on Jango Valeiro, on the seaward side of Ilha de Luanda—the site where he sold his first ice cream during the war decades ago. Prodiaman employs 370 people in oil and gas, diamonds, security, engineering, real estate and restaurants. Next to the office, where accountants are plotting the company’s target of $50-100 million in annual turnover within two years, is the small shop that still sells the best ice cream in town.
Godinho, 49, looks almost half his age. He is tall, slim, wears an elegant, obviously expensive suit and a pristine white shirt. An air of smooth sophistication swirls around him, but there is something about his laid-back, slightly hoarse way of speaking that suggests he has been through a few rough patches on the way to riches.
“Since independence in 1975, Angola had a communist regime. After the fall of the Berlin wall in 1989, we saw a big change in our political system. I joined Sonangol in 1980, when I was still studying to become a civil engineer,” he says.
“Sonangol at the time was implementing a philosophy which stated that all operations should be Angolanized. And Texaco was operating a brand new platform, for which Sonangol also wanted to recruit Angolans. It was almost impossible back then to find local skilled people. In 1981, Sonangol asked me to work on Texaco operations. That is how I joined Texaco.”
Working for an international company from a capitalist country was the best possible decision Godinho could have made at the time. His secretary walks in with a contract. He signs it casually, without missing a beat.
“I stayed with Texaco offshore on block 2 until 1987. That year I quit and earned my engineering degree at university. I was then invited to join Chevron. But Texaco also invited me, and I decided to go back. My salary at Texaco as an engineer was $300 a month.”
As his story unravels, Godinho launches into colorful memories of wartime Angola in the 1980s.
“Buying a car in those years was extremely difficult. To get one, you had to write many letters, which had to pass through various official institutions. But at one point, the Angolan government sold a Nissan Patrol at a very low price by Angolan standards. The exchange rate on the street at that time was 10,000 kwanzas [to the] dollar. Just to give you an indication of what prices were like: by selling two boxes of beer you could buy a round-the-world flight. Angola’s economic situation was abnormal.
“There were only two ice cream stores in Luanda in those years. I used to take my kids there. While I was waiting, I saw many people walk in and out. That’s when it dawned on me. ‘Bingo!’ I thought, ‘I will start an ice cream business.’ A friend of mine insisted that I should buy the Nissan Patrol. I said: ‘With my salary, I’d regard it as my second wife! I’d rather buy an ice cream machine.’”
From then on, things moved quickly. “I didn’t know a thing about ice cream, so I asked around. A week later, I called a friend who worked at a bank and told him about my plan. ‘But you’re a Texaco engineer!’ he said. ‘I’m only going to sell ice cream in my free time,’ I told him. My friend agreed to help, and bought me two ice cream machines. Now all I needed was a place to put them.
“I wanted to be on the Ilha. Angola is a hot country, so you need to be at the sea. One day, I took a car and drove all along it. I remember knowing: ‘Today is the day.’ I knocked at every restaurant’s door with my two ice cream machines. They all said: ‘Are you crazy?’ But at Valeiro, a restaurant built in 1935, they said ‘Yes’.
I only wanted 12 square meters, and they charged me $1,000 a month. I could have flown around the world and come back with goods instead. But I didn’t want to lose this opportunity, so I said: ‘Okay, I’ll do it,’ and we signed a contract. For 18 months we just worked to pay salaries and build our store.”
Godinho was innovative enough to outshine his two competitors. “The others were making ice cream with 50kg bags of UN refugee milk powder bought on the black market. It wasn’t good quality milk; at times it even caused diarrhoea. I wanted high-quality milk—Nestlé—although it was very expensive.
“Twenty years ago, ice cream in Angola was sold in cones. But because of the sun, it melted within two to five minutes. So we used plastic cups instead. We also sold our ice cream at half the price of our competitors. That’s why it took us 18 months to start making a profit.”
Soon, demand outstripped supply and Godinho embarked on new adventures. “We had 12 ice cream machines by then, and decided to diversify our economic activity. The Angolan government offered companies the opportunity to invest in diamonds, so I created Prodiaman (Produção de Diamantes) in Lunda Sul, a partnership with the South African company Petra Diamonds.”
Then disaster struck.
“In 1995, the Angolan war intensified. Five of Prodiaman’s employees were killed, UNITA burnt all our equipment and our partner left the country. Our next quest was a safer business. The answer to that was oil, because the Cubans were protecting American interests in oil-rich Cabinda. We identified services we could offer these oil companies. Again, the Angolan government and state oil company Sonangol provided opportunities for private investment.”
Godinho began representing the English company Axia Serck Baker and sold $30 million worth of equipment to Exxon Mobile in block 15 on their behalf. American company NATCO bought Axia, and Godhino stayed as their representative.
“NATCO had a subsidiary: Test Automation Control. This company requested our support in getting Sonangol interested. Sonangol suggested forming a joint venture on block 0 in 2003, which was the first joint venture we created. We got a contract on block 0, which is operated by Chevron and employs about 90 expats and 120 Angolans. In 2006, one of our companies—Prodoil SARL—successfully made a bid for 20% of block 1/06. That block was operated by Tullow Oil.
“In 2004, we formed a joint venture between Prodoil (40%) and American engineering company Paragon Inc (60%). We are now also involved in projects on block 0 with Chevron, and on block 15 with Exxon.”
Godinho’s steep journey uphill was interrupted a second time, during the economic crisis of 2009 and 2010. “Our business was seriously affected because most of our projects are financed by international lenders. In real estate development, loan approval procedures were extended to years instead of months. In the oil and gas industry, operators struggled to get financing. That either left us—the service provider—without contracts, or tremendously delayed the contract and the project’s execution.
“Our joint venture partners also struggle when operators stop investing, which decreases the number of projects and contracts. During the oil price crisis in 2008, projects worth $140 per barrel stopped being viable. Oil prices reached $30 per barrel at a certain point. That led to the suspension of many projects.”
Godinho says that despite the economic crisis, doing business in Angola is a daily battle. “Something you normally do in a year takes five to six years in Angola. Only 5% of your time is dedicated to business. It’s a nightmare.”
This is supported by World Bank research. In its Ease of Doing Business report for 2011, Angola ranks 163 out of 183 countries. On the other side of the coin, Angola has a healthy 12% economic growth forecast for 2012—at a time when many countries are struggling for growth.
Bureaucracy is a major problem and connections, Godinho says, are key.
“I believe the government wants to support the private sector, but only multinationals in the oil and diamond sector are seeing the results so far.
“The problem is that the government consists of two to four guys, while the system consists of millions of people. You can’t expect a mosquito to carry an elephant.”

Oil’s Fair In  Ice Cream And War

On New Year’s Day, Nigerian president, Goodluck Jonathan, announced the end of the country’s 19-year-old fuel subsidy. It meant the fuel price soared by 116% (to 150 naira from 65) overnight. Before then a liter of oil was cheaper than a 350ml can of coke.
The reason, according to the government, is that the subsidies have strained the country’s coffers.
The people were angry, with labor and civil society groups organizing nation-wide strikes. Protestors stormed Nigerian airports to prevent operators from checking in more than 500 passengers—a mere sideshow in what was to prove a massive and violent protest.
On any given day, traffic on the Lekki expressway, where it meets Ozumbo Nbadiwe Street in Victoria Island, Lagos, resembles a writhing dragon, seeking escape. The mass action left these streets  deserted. Protestors shut down petrol stations, banks, shops, schools, offices and ports. Barricades went up and tens of thousands took to the streets.
The protests turned violent; a curfew was imposed in the Kuduna and Niger states. Borno state was placed under a state of emergency. Fourteen people were injured in Kano as the protestors clashed with police. The police used teargas and live ammunition to disperse the crowds. In the confusion the authorities put the death toll anywhere between three and 22.
Nigeria is Africa’s largest oil exporter and the fifth largest provider of oil to the United States. Its economy relies heavily on oil, with production of approximately 2.5 million barrels per day with a target of increasing to three million bpd this year.
The reported $7.4 billion a year that will be diverted from the subsidies is to go towards investment in infrastructure. This is the idea of the Subsidy Reinvestment and Empowerment Programme. Pouring the money into infrastructure projects in power, transportation, roads, water and petroleum sectors. The creation of a downstream sector could lead to job creation and a large stream of revenue on the way to lending Nigeria middle-income status.
For the 160 million people in Nigeria, the long-run benefits of the subsidy removal are as naught, compared to rising food and transport prices.
Wole Famurewa, a presenter at CNBC Africa [in Nigeria] says:  “The price of bread was up by 10% after the first week. ”
This is what the people, most earning less than $1.25 a day, now face.
Several reports indicate that the strikes cost the economy between $600 million and $1 billion dollars per day, with worries over the Nigerian oil supply pushed up global oil prices. The fifth day of the strike came with a threat by workers to completely cut output on Januart 14 if fuel price was not put back to 65 naira ($0.40).
The last oil strike was in 2007, when outgoing president, Olusegun Obasanjo, raised fuel prices, doubled value-added tax and privatized refineries.
The Department of Petroleum Resources said: “Both parties know the importance of the negotiation and we are quite confident that they will come to an agreement.”
At this point, the labor movement had declined an offer by the government to reduce fuel prices to 100 naira-a-liter and Nigeria’s House of Representatives passed a motion urging government to return fuel subsidies.
The mass action in Nigeria takes place against the backdrop of the Petroleum Industry Bill (PIB). PIB seeks to deregulate and decentralize the oil and gas industry to make it more efficient. The process of transforming the Bill into law has stalled for more than five years. Civil society argues, the solution for government should not be in the removal of subsidies, but decentralizing and deregulating the industry to be more efficient and profitable.
A possible compromise could be to phase out the subsidies, rather than scrap them. On January 16, the government agreed to a fuel price of 97 naira ($0.60) and the strike was suspended.

Uproar  In Nigeria

For years, the late Colonel Muammar Gaddafi was a dog in a manger as far as Western business was concerned. They thought the Libyan leader was merely lying lazily on a fortune in natural resources.
It was only through a thaw in relations in the leader’s last years, that Libya opened up to investments from the West.
When the rebel National Transition Council (NTC) ousted Gaddafi in October 2011, there was the promise that the new broom would sweep the way clear for Western business—surely.
Think again. The country’s internal political divisions, the new rulers’ tenuous authority and China’s keen interest in Libya’s oil, may make the transition a mere milestone in a long legacy of rancor with Libya.
<div id="attachment_394" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-394" class="size-large wp-image-394" src="/wp-content/uploads/2017/04/000_Nic6022212-1024x683.jpg" alt="" width="474" height="316" />Zawiya Oil Refinery, some 40 kms west of Tripoli</div>
Libya’s oil is the ultimate prize. Libya has the eighth  largest oil reserves in the world and the second highest natural gas reserves in Africa. Prior to the revolution, oil accounted for a quarter of the country’s total economic output, and 95% of its export earnings, grossing $44 billion in 2010. While the conflict forced 1.6 million barrels-per-day production to a standstill, government reports suggest that 90% of oil installations escaped serious damage. Still, it could take up to three years to achieve pre-conflict levels of production. The question now is who will gain control of Libya’s ’s oil.
Under Gaddafi’s leadership, the National Oil Company (NOC), and a cohort of cronies close to the Colonel, determined who got what, when and how. While the NOC remains in place, the NTC has indicated that it plans to split it into three entities—Exploration and Production, Refining, and possibly Natural Gas or Solar Power, making it a commercial organization.
The NTC said it will honor all contracts signed with the Gaddafi regime. The position betrays the anxieties of a still new and insecure leadership to manage the uncertainty of transitional politics, and significantly, keeps China and other Asian powers in the mix. Besides the Libyan companies already in the fray there are: ENI; Repsol; Gazprom; Total; China National Petroleum Corporation, BP, and Exxon Mobil, in Libya’s crowded field.
How things will play out in Libya’s oil sector will be determined at the intersection of geopolitics and the country’s internal politics. The physical and political proximity of Tripoli to European players—France, Italy and the UK—effectively throws Libya into the West’s sphere of influence, and reverses China and other Asian players’ good relations with Tripoli under Gaddafi. In the context of Libya’s unsettled political environment, such diplomatic influence provides a crucial lever in the country’s oil sector. At the very least, this influence will be felt in the reconfiguration of governance in the country as a whole, and in the energy sector in particular. Libya’s new rulers have already requested for technical support in the re-construction of the oil sector, and the West’s support is bound to involve re-stringing of dynamics of governance in the sector.
Politics will of course be king in shaping the dynamics of the energy sector in Libya. Besides lining the pockets of close allies, Gaddafi used oil resources to build a remarkable social welfare state that remains unrivalled across Africa. The upshot was to rocket Libyans’ expectations on the state. Beyond instituting a democratic system of government, in which citizens have a voice and enjoy political freedoms, the NTC government will be under pressure to match, if not exceed Gaddafi’s generosity among Libyans. Key to this will be appeasing anti-Gaddafi combatants and this might yet demand that the NTC offers, in material terms, more than Gaddafi did.
While appeasing anti-Gaddafi combatants will be essential in pre-empting disillusionment, a formula for inclusive governance and development will be critical for achieving stability in Libya. Regional and tribal loyalties remain strong amongst the country’s 140 plus tribes and clans. There is also an ethnic and linguistic fault line between the Berber minority and the Arab majority. The NTC’s ability to manage inter-regional rivalries between the East and the West however will be the ultimate political challenge for the NTC.
Ultimately, the NTC’s legitimacy will hinge around its management of the economy. The challenge for the NTC will be to raise, and even exceed pre-conflict economic growth rates, which in 2010 stood at 7.4% against 2.4% inflation. The NTC will no doubt be focusing on resuscitating oil production, for which it will need significant assistance from its international partners. This creates a strong entry point for China, which has muscled its way across Africa through development support for governments under significant economic pressure.
Still, the NTC has indicated its intentions to use Libya’s resources abroad—Gaddafi’s loot basically—to rebuild the economy. At least in the first half of 2012, the country’s top diplomats will be focusing on negotiating the full release of these funds, whose bulk, ironically, is in Western institutions. In the meantime, it is very unlikely that Libya will spurn any technical support from international financial institutions, or technical support from its new allies in the West. For now, it is safe to assume that who gets what of Libya’s oil resources is a question that will in large part be answered between Tripoli and Western capitals—London and Paris, to be precise.

Politics Is The Game, Oil Is The Prize

<div id="attachment_162" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-162" class="size-large wp-image-162" src="/wp-content/uploads/2011/11/iStock_000013732621Large-1024x675.jpg" alt="" width="474" height="312" />Growth will be driven by government expenditure as revenues increase through higher oil production and prices</div>
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Following a remarkable run of double-digit growth, the Angolan economy took a hit in 2009 and 2010 due to a fiscal and balance of payments crisis. However, the signs of a strong recovery are in the offing and economic prospects are now looking brighter. Already all three main rating agencies, Moody’s, Fitch and Standard &amp; Poor’s, have raised the country’s sovereign rating. The International Monetary Fund (IMF) expects GDP growth of 3.7% in 2011, building on the 3.4% of 2010. The IMF expects growth to accelerate to 10.8% in 2012. Growth will be driven by government expenditure as revenues increase through higher oil production and prices. The IMF’s stand-by arrangement (SBA)—a credit line—which runs until February 2012, is likely to anchor macroeconomic policies in the medium-term at least.
<div id="attachment_134" style="width: 360px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-134" class="size-full wp-image-134" src="/wp-content/uploads/2017/04/angola.jpg" alt="" width="350" height="376" />Growth will be driven by government expenditure as revenues increase through higher oil production prices</div>
Government expenditure will focus on massive social and infrastructural gaps in the economy. The construction sector will continue to play a central role. The mining sector is likely to get a boost as the government plans to diversify the economy away from oil and gas production, as recommended by the IMF. Angola has substantial mineral deposits which include iron ore, copper and diamonds. The mining sector was deemed unviable during the civil war and neglected. After the civil war, the sector took a back seat to oil and gas production and attracted little investment. A major development in the mining sector will be the introduction of a new mining code that is aimed at boosting investment into the sector. The code was passed by parliament in July this year and is set to come into eff­ect by year-end. The state, through its mining company Endiama, aims to play a major role and to take 51% in all diamond mines.
Infrastructural bottlenecks and robust domestic demand are likely to keep infl ation elevated in the months ahead. On the political front, the ruling Movimento Popular de Libertacao de Angola (MPLA) continues to dominate.
<div id="attachment_161" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-161" class="size-large wp-image-161" src="/wp-content/uploads/2011/11/iStock_000015823770Large-1024x683.jpg" alt="" width="474" height="316" />Oil Platform offshore Angola</div>
It holds 191 of the 220 seats in parliament. The fractured opposition will only help the MPLA keep power. Elections are set for late 2012. The incumbent president, Jose Eduardo dos Santos, is expected to stay in power. In February 2010, the country adopted a new constitution whereby the president is no longer elected by popular vote; instead the president will be from the party with the most seats in parliament. The government has faced huge challenges since the end of the civil war. Poverty is still prevalent despite the country’s huge mineral wealth. Infrastructure remains poor following decades of civil war. There is discontent among the people, who feel they should be getting their fair share of economic prosperity. This discontent is unlikely to see a repeat of the “Arab Spring” on the south-west coast of Africa, though. Angolans are weary of conflict.
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Angola Rising From The Ashes Of War

Gabon has a population of about 1.5 million people and is an upper middle-income country with a $13.1 billion economy. It may be one of the wealthiest nations on the continent, but it suffers from gaping inequality. The richest 20% of the population accounts for 90% of income; a third live in poverty.
<img loading="lazy" decoding="async" class="alignleft size-large wp-image-47" src="/wp-content/uploads/2017/04/Gabon-1024x692.jpg" alt="" width="474" height="320" />
According to the International Monetary Fund (IMF), growth in 2010 was 5.7%, following a contraction of 1.4% in 2009 due to the global recession. The IMF expects growth to remain relatively flat in 2011 at 5.6%. It also expects public investment and a rebound in mining to underpin growth this year.  On the other hand, the IMF sees a slowing global economy and the associated downward pressure on commodity prices as a downside risk to growth.
Gabon’s wealth relies on oil, which makes up over 70% of exports, with estimated proven oil reserves of two billion barrels at the beginning of 2010. With faltering oil prices and production constraints, Gabonese authorities are set on diversifying the economy away from this reliance on oil. The government plans to transform by creating a business-friendly environment. To achieve this goal, it is embarking on a public investment drive.
Manganese mining and logging are the economy’s other two key sectors. Gabon also has the world’s largest iron ore deposit, which is likely to attract further investment in the mining sector. Agriculture and tourism remain small sectors in the economy due to a lack of infrastructure.
Industry makes up nearly two-thirds of the economy, while services make up nearly a third. Agriculture is a mere 4.5% of the economy.
Gabon has a benign political environment. The incumbent president is Ali-Ben Bongo Ondimba from the long-ruling Gabonese Democratic Party (PDG). He was elected in 2009 following the death of his father, Omar Bongo Ondimba. Despite the opposition crying foul that the vote was flawed, Gabon has remained stable.
<img loading="lazy" decoding="async" class="alignleft size-large wp-image-48" src="/wp-content/uploads/2017/04/iStock_000004501460Large-1024x768.jpg" alt="" width="474" height="356" />
The country is due to hold legislative elections in November. The current legislature’s mandate ends in January.  In May, the president asked the country’s constitutional court to delay the election for a year so that the country can focus on hosting the African Cup of Nations in January. Gabon is a co-host with Equatorial Guinea. The delay is also to allow for the introduction of a biometric voter system to avoid election fraud. With both the ruling party and opposition essentially in agreement for a postponement, the constitutional court is likely to grant the request.

Tag: Oil

FORBES AFRICA SOCIAL MEDIA

“Numbers Don’t Lie But People Do”

Energy Under The Waves

Light At The Beginning Of The Tunnel

Gas And Cocoa Oils Ghana Growth

Between A Rock And A Hard Place

Don’t Panic, We’re Just Looking For Energy

Oil’s Fair In Ice Cream And War

Uproar In Nigeria

Politics Is The Game, Oil Is The Prize

Angola Rising From The Ashes Of War

Iron Ore Galore