Tapping the potential of Africa's oil

Chinese oil companies such as CNPC are making the most of their technology, hard work and respect for local people to tap African oil reserves, as Zheng Yangpeng reports from Niger and Chad

After a two-and-a-half-hour flight from Niamey, the capital of Niger, the small plane landed at a small airport. The airport, Jaouro, is dubbed jiaorou (which means "tender" in Chinese) among Chinese workers here.

But conditions here are just the opposite of what its Chinese name implies. Lying in the heartland of the southern Sahara, the world's largest and roughest desert, the lonely base here is routinely subjected to scorching heat, sandstorms, scorpions, snakes, malaria and even robberies.

None of this put off China National Petroleum Corporation, China's largest oil producer, which was determined to extract Niger's first barrel of oil from the desert.

For the past half-century, people in Niger, a former colony of France, were told there were oil reserves beneath the Sahara. Oil giants came and went, as they either failed to find oil or what they found was too little to justify commercial exploitation.

Then came the Chinese oil company, which is the fifth operator of Niger's Agadem block.

In June 2008, CNPC signed a production sharing agreement in Agadem with the Nigerien government, promising not only to build the oilfield, but also a pipeline and a refinery.

"Typically, oil giants are reluctant to build refineries as the profit is much lower than producing crude, let alone if highly productive reserves have not been found," said Fu Jilin, general manager of CNPC International in Niger.

The groundwork took place at a furious speed. A prospecting team set foot in Agadem less than a week after the agreement was signed.

Various engineering contracts were soon concluded. Jaouro airport, a critical project that would shorten the journey time between Niamey and Agadem from three days by car to less than three hours, was finished in 66 days. The speed was remarkable, given that all the earth the construction project needed had to be transported from outside the desert area.

"The sands of the Sahara are too fine to be used for construction purposes," said Fu.

The construction spree ended abruptly on Feb 18, 2010, one day before the then government was to grant the exploitation license to CNPC. On that day, the then government was replaced by a military commission. Suddenly, Fu found his company was confronted with mounting uncertainties.

In August 2010, the transitional government granted CNPC its long-awaited exploitation license. An agreement on the retail price of the refined oil was not settled until September 2011, after marathon negotiations with the elected government, led by President Mahamadou Issoufou.

"The Nigerien side had doubts about our price, and insisted that it was too high. But if we had agreed to the price they wanted, the refinery would certainly run at a huge loss," Fu said. "With a calculator in hand, I calculated the composition of the price in front of them, over and over again," he said.

"Please understand Niger's culture of suspicion. Nigeriens normally don't trust things done by others. It is not targeted specifically at CNPC," said Djibo Salamatou, former energy and petroleum minister, who had participated in the negotiations.

Nov 28, 2011 was a historic day for Niger. CNPC's refinery produced the first barrel of refined oil. Nigerien President Issoufou filled his car with fuel that was produced in his own country. It was an emotional moment for him, for the Nigerien people and CNPC employees.

"Fifty years ago, Niger embarked on the path of oil exploitation. Not until today did it produce the first barrel of oil. Niger has ushered in a new period of development," Issoufou said at the event.

The Agadem oilfield, from which the oil is transported through a 462.5 kilometer pipeline to the refinery in Zinder, now has an annual production capacity of 1 million tons.

Chinese spirit

The morning breeze of the Sahara brushed over houses, a basketball court and green plants that surround Jaouro airport. Standing there, it was difficult to imagine how tough the situation was four years ago when the base was first built, with no available equipment and no logistical support.

All that has been changed by the Chinese and local workers' dedication. Fu said that in just four months, the first cargo of drills, cranes and other equipment arrived from China at the Nigerien border. The then energy and mining minister was so shocked that he immediately decided to go there to welcome the cargo.

Actually, everyone from the energy and petroleum minister to project managers, and from the prime minister to ordinary employees, said that they were impressed by the Chinese culture of industriousness.

Souleymane Habiboulaye, a manager at CNPC's Niger company who has worked for the company since it was launched, said he learned a lot from his Chinese colleagues' professional skills, punctuality and "fix the problem" spirit.

"In the startup period, we encountered numerous tough problems. CNPC workers never give up. They fix them bit by bit," Souleymane said.

Despite CNPC's efforts, complaints also existed among Nigeriens, with some saying Chinese companies are good at churning out roads, factories and bridges, but are reluctant to transfer their technological know-how.

But Abdoua Louche Hassane, who has worked for CNPC from its beginnings in Niger and is now the chief coordinator of the Agadem project, said this is not true.

"Oil engineering expertise is complicated. It cannot be taught in a day or two. But some Nigeriens are not patient enough to learn. They left before they grasped the necessary expertise," Hassane said.

This is confirmed by Dong Jing, a manager at the drilling rig. He said it generally takes him two years to train a skilled Nigerien rig worker, who before hiring has virtually no knowledge about the work. In comparison, it only takes around six months to train a Chinese worker who has had an occupational education.

Even so, Dong said CNPC is willing to localize its workforce as much as possible to reduce the need to send Chinese workers there.

Hassane said another misperception is that Chinese companies are unwilling to give important positions to local people.

"At first, the work here was demanding and the salary was not as high as that offered by Western companies. For this reason, among the six people who were recruited initially, four soon left," Hassane said.

For Hassane, the position CNPC first offered of assistant engineer was a bit frustrating. He thought his oil engineering college degree could earn him a job as an engineer. But he stayed anyway. Three months later, he was promoted to become an engineer.

"I think the Chinese way of doing things is different from others. They value work experience and performance over what you learned in college," Hassane said.

Hassane is one of more than 600 local people directly hired by CNPC's company in Niger. Before CNPC arrived, oil major graduates like Hassane had to work far from home in neighboring Nigeria's oil companies. Now, thousands of other jobs have been created, in transportation, wellsite construction and security, thanks to CNPC's project.

Farid Mohadi, a Nigerian who had worked for two oil companies in Nigeria before he came to work for CNPC in Niger, said he was impressed by the fact that African workers were more respected in Niger.

"The Chinese are humble. They don't assume they are right and lecture us what to do," he said.

Chad's project

Niger is only one of several projects that CNPC has invested in recent years in Africa, a continent that is believed to have 8 percent of the world's oil reserves.

CNPC's project in Chad bears similarities with Niger: both countries are former French colonies, and both have yearned for self-produced refined oil for years. What sets Chad apart from Niger is that CNPC is not the only player. Esso, a US company, drills crude in Chad and transports it through an Esso-World Bank co-funded pipeline via Cameroon to the international market. Due to the lack of a refinery, the crude exporter had to import refined oil.

EnCana, a Canadian oil company, failed to spot productive reserves in the country after five years of prospecting.

But Dou Lirong, general manager of CNPC International (Chad) Co Ltd. (CNPCIC), believed there would be large potential crude oil resources based on his expertise and previous experience in China and Sudan.

Four months after the purchase, CNPC's trial rig successfully spotted a commercial oil flow, though the oil was too heavy to be developed economically. Encouraged by the find, Dou decided to mobilize the second drilling rig.

Just like the scenario in Niger, the process was interrupted by a coup in early 2008. Dou and his colleagues experienced an evacuation and after the turmoil ended and the president, Idriss Dby Itno, was returned to office, CNPC employees returned to the country.

Good fortune has accompanied them since. In 2009 April, CNPCIC found a high-production light oil flow, followed by several other important finds.

In April 2011, CNPC's first production well in Chad came on stream. Just four months later, a new refinery became operational near N'Djamena, which is 60 percent owned by CNPC International and 40 percent owned by the Chadian Government. For the first time in Chad's history, the country was able to supply itself with home-produced gasoline and diesel.

"The project brought job opportunities for Chad. And Chadians have enjoyed favorable oil prices since CNPC's refinery became operational a year ago," said Brahim Alkhalil Hileoiu, Chad's energy and petroleum minister.

"China was often accused of only being interested in Africa's natural resources," Yang Guangyu, China's former ambassador to Chad, said at the completion ceremony of the refinery.

"But people will think it is unfair to say this if they know that only 13 percent of Africa's oil was exported to China."

"The refinery is a convincing example of how we can bind each other's interests together. It not only belongs to China, but also to Chad," Yang said.

However, challenges still remain.

Both in Niger and Chad, the domestic markets are too small to justify refineries running at full capacity. Without an international pipeline, the oil can hardly be exported to the international market from these landlocked nations.

But experts said the Nigerien and Chadian projects are typical of China's energy cooperation with Africa as a latecomer to the continent.

Chinese companies have to take exploration blocs that other companies might see as valueless, but thanks to their technology and hard work, they have routinely tapped surprisingly good oil reserves.