A RECENT report released by the
Overseas Development Institute (ODI), the UK’s think tank on development
issues, has x-rayed the dynamics of China’s oil economy and its impact on
African countries, including Nigeria.
The
document, which ODI was made available to The Guardian, indicate that a massive
increase in shale gas production in China is projected to mean the Asian tiger
will import 40 percent less gas — with a big impact on some of the world’s
poorest countries.
Angola and the
Republic of the Congo are predicted to suffer a 13 percent hit to their
national earnings because of increased energy production by China. Equatorial
Guinea and Sudan could lose 5 percent, Yemen 4 percent.
The report looks at
the ripple effect of a Chinese government forecast that they will produce
between 60 and 100 billion cubic metres of shale gas in 2020, up from 6.5
billion in 2015.
The huge increase
in production will make China more economically independent. But the country’s
ability to hit the target is dependent upon harnessing technology, which
requires huge amounts of water.
The report,
estimates that, if successful, China’s imports of gas could be up to 40 percent
lower in the future. But this increase in home production could hit the
economies of poorer countries , who currently export gas.
Zhenbo Hou, a
researcher into the growing BRICS (Brazil, Russia, India, China and South
Africa) nations at the ODI, said: “China has run a very successful shale gas
pilot scheme. “Starting from a low base, they now seem on course to increase
their production ten-fold to between 60 and 100 billion cubic metres by 2020.
“This will
make them less reliant on countries like Russia for energy in the future — so
it is a very important geopolitical moment.
.
“Combined with the
increased shale gas production in the USA, it will hit the economy of small
exporters in the developing world.
.
“This increased
production could lead to smaller markets and lower incomes for poorer countries
that export gas – like Yemen, Mozambique, Ghana, Republic of the Congo,
Mauritania and Nigeria.
Asked, however, to
explain how the expected increase in China’s shale gas production could
significantly affect Nigeria — in view of the fact that very little crude oil
business currently exists between both countries — the following exchange
ensued:
How would you place China’s
annual crude (and gas) imports from Nigeria; what percentage of the country’s
exports does China take?
Very small. According to
NNPC’s Annual Statistical Bulletin, only about one percent of NNPC’s crude oil
is exported to China.
Since, according to your report,
the increased production would hit the poorest African countries, do you really
think Nigeria whose economy (thanks to GDP rebasing) recently became the
biggest in Africa, falls within this category?
No doubt, major energy
exporters such as Nigeria will be hit, but the effects would come more from the
loss of exports to the US
With specific reference to
Nigeria, what advice do you have for African countries, which, according
to you, will be adversely affected by this China’s new-found
capacity in shale gas production?
China’s new found
shale-gas capacity would only have limited impact on Nigeria at the moment, as
very little of Nigerian oil exports depend on China
It is well known that China’s
economic ties with Nigeria, is not so much about oil; Nigeria’s
big developing economy provides some critical
(‘virgin’) training ground and
job opportunities for China’s technocrats. Don’t you think that China would
still need Nigeria a great deal — shale gas or not?
Nigeria is a very
important friend for China in Africa and there are many experienced and
well-qualified Chinese companies and engineers working in Nigeria. The Chinese
Premier’s visit to Abuja this week (last week) will highlight and showcase this
ever-growing relation.
The increased
shale-gas production is also not without risks within China itself, as it could
divert water from agriculture and human consumption. The supply of water is
likely to be more constrained in China than in the USA, which is also becoming
energy self-sufficient thanks to fracking.
America is set to
overtake Saudi Arabia as the world’s biggest oil producer. This increased
production by the world’s two economic superpowers – China and US - will lead
to smaller markets and lower incomes to poorer countries that export gas,
according to ODI.
Currently China produces very little shale gas, but production is
expected to reach between 60 and 100 bcm by 2020, compared to an estimated 250 bcm
imports of gas predicted in 2020 – from which it may be inferred that Chinese
gas imports would by then have been around 30 or 40 percent higher in the
absence of domestic production.
