PETROLEUM DEVELOPMENTS IN WEST AFRICA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700030019-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: May 19, 2010
• Sequence Number: 19
• Publication Date: February 1, 1972
• Content Type: IM

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DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Petroleum Developments in West Africa
Confidential
ER IM 72-19
February 1972
Copy No-: 65
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WARNING
This document contains information affecting the national
defense of the United States, witliin the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohib?ed by law.
GROUP I
Eeduded Imm ,, nn,oIh
downgroding and
d,,Ic~ufirofon
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CENTRAL, INTELLIGENCE AGENCY
Directorate of Intelligence
February 1972
INTELLIGENCE MEMORANDUM
PETROLEUM DEVELOPMENTS IN WEST AFRICA
Introduction
1. Growing oil consumption and increasing dependence on a limited
number of supplying countries - many with unstable political situations -
have provided the international petroleum companies additional reasons for
searching for new deposits. Part of the search is concentrated in West Africa,
where the oil companies are attracted by the high-quality oil and its
closeness to North American and West European markets. Exploration
concessions have been awarded in vktually every country along the coast.
One country already has become an important producer, two other countries
have commercially significant outputs, and several appear to have some
potential.- This memorandum examines oil exploration, production, and
trade in West Africa; indicates the area's place in world supply; and assesses
the role of oil in the economies.
Discussion
Background
2. Risir.g living standards and an expanding world population are
rapidly increasing the demand for energy. The Western World's consumption
of primary energy rose by 70% from 1960 to 1970 and is expected to
increase another 70% by 1980, according to estimates of a leading oil
company. For centuries, coal was the leading energy source, but oil overtook
it in the mid-1960s and by 1970 was filling more than one-half of the
Western World's primary energy requirements. Only a few industrialized
Note: This memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate of Intelligence.
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countries, notably the United States and Canada, are able to satisfy all
or much of their oil demand from internal sources. Others, including all
West European countries and Japan, must depend largely on petroleum
imports.
3. The supply of oil for export increasingly has become concentrated
in a few Middle Eastern and North African countries. This situation has
created uneasiness in consuming countries about possible supply
interruptions resulting from political instability, nationalism, or pressures
fog rapidly increasing oil revenues in many exporting countries.
Consequently, international oil companies have sought greater geographic
diversification of supply.
4. Much exploration activity currently is focused on the sedimentary
shelves and slopes lying off all six continents. These offshore areas are
believed to be packed with sediments of the Tertiary period and therefore
offer promising opportunities for oil discoveries. in the exploration surge,
the entire coast of Africa, and particularly the west coast, will be one of
the world's most active arenas in the 1970s. If the oil companies'
expectations of finding additional oil deposits in West Africa are at least
partly realized, dependence on North Africa and the Middle East could
be reduced to some extent. Moreover, since the West African countries are
numerous, the oil companies could spread their political risk.
Exploration in West Africa
5. The search for oil is proceeding at a frenetic pace along the west
coast of Africa, which is now lined by an almost solid string of concessions.
Exploration is under way, mostly offshore, in most of the 20 countries
and territories stretching from Spanish Sahara to Angola (see Figure 1).
Although only three West African countries are now significant producers
for world markets, discoveries in several others suggest the possibility of
future commercial production. In addition, the international companies have
found at least traces of oil in still other countries, particularly in the offshore
areas. Exploration activities are summarized in Appendix A.
Petroleum Production
6. Nigeria, Gabon, and Angola are West Africa's main oil producers;
in addition, Congo (Brazzaville) has a small output. Their combined output
in 1971 averaged 1.8 million barrels per day (bpd), or 3.7% of the world
total. West African output has reached significant proportions only within
the last several years. Oil production in 1971 was almost four times that
in 1966 - the last full year before the Nigerian civil war severely disrupted
activities in the area's most prolific fields (see Table 1).
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Figure 1
Petroleum Producing Country
ap Oilfield
? Tanker Terminal
? Refinery
SOUNUArY REPRESENTATION 19
NOT NECESSARILY AUTHORITATIVE
0 500 1000 Miles
i I
0 500 1000 Kilometers
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Table 1
West Africa
: Growth in Oil Production
Thousand Barrels per Day
Year Nigeri
a Gabon
Angola
Congo
Total
1960
17
11
0
1
29
1961
46
15
2
2
65
1962
67
16
10
2
95
1963
76
19
16
2
113
1964
121
21
18
2
162
1965
272
26
13
1
312
1966
418
29
12
1
460
1967
319
70
10
1
400
1968
142
92
19
1
254
1969
540
100
49
Negl.
689
1970
1,084
108
100
Negl.
1,292
1971 a/
1,530
110
120
Negl.
1,760
7. With outpuu averaging 1.5 million bpd in 1971, Nigeria alone
accounted for 87% of the West African total.* Althoi+gh it has only 1%
of the world's proved oil reserves, Nigeria contributed 3.2% of global output
in 1971, ranking ninth among all producers. Production reached almost 1.7
million bpd at the end of the year and reportedly will climb to about
3.4 million bpd by 1975. More than one-fourth of production came from
offshore fields in 1971, and within a -few years these deposits probably
will account for more production than the onshore deposits.
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8. Oil was discovered in Gabon and Angola in the 1950s after about
30 years of intermittent exploration, but output has shown a marked
upward trend only in recent years. In 1971, production averaged an
estimated 110,000 bpd in Gabon and 120,000 bpd in Angola. In Gabon,
production is scheduled to rise to about 240,000 bpd by 1975, and in
Angola proved reserves also promise continued rapid expansion of
production. The most important producing fields and the best prospects
for the future in Gabon are on the coast and offshore near Port Gentil
and Gamba. Angola's best prospects lie offshore. After unsuccesful
exploration for additional onshore ueposits for eight years, drilling was
undertaken offshore in 1966, and worthwhile reserves were discovered.
Although hampered by the oil's heavy wax content, offshore production
now accounts for most of Angolan production.
9. Congolese production is minor and has been declining recently
because the only producing field is being depleted. Production dropped from
about 2,000 bpd in the early 1960s to only 384 bpd in 1970 - a quantity
considerably smaller than is obtained from an average well in Nigeria.
Offshore concessions located between known oil deposits off Gabon and
the Angolan district of Cabinda were awarded in 1968, oil was discovered
in 1969, and production is to begin this year. The concessionaire estimates
that the deposit will yield 30,000 bpd by the end of 1972, but a lack
of pressure, the deep water location, and the oil's high viscor';' may hold
output below that level.
West African Oil Trade
10. Except for a small amount refined for local use,* all West African
crude oil is exported. Exports have increased rapidly since the early I 960s;
they accounted for almost 5% of the world total in 1970 (see Table 2).
With exports of nearly 1.1 million bpd in 1970, Nigeria ranked seventh
among all exporting countries. West African oil is particularly desirable
because it is near the big markets in Western Europe and North America
and contains little sulfur. Western Europe is by far the largest customer,
taking over 70% of total exports in 1970 (see Figure 2). The United
Kingdom, the Netherlands, France, and West Germany are the leading
importers. The United States is also a growing importer, both directly and
through refineries in the Caribbean.
Role in West African Economies
11. Petroleum development has enriched the economies of the three
main producing countries - Nigeria, Gabon, and Angola. In each country,
investments by oil companies are the largest ever made by one industry.
* For a list of refineries in the area, see Appendix B.
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Table 2
West Africa: Petroleum Exports
Thousand Barrels per Day
Percent of
World
Petroleum
Year
Nigeria
Gabon
Angola
Congo
Total
Exports
1963
76
19
6
2
103
0.8
1965
266
26
2
1
295
2.0
1969
548
88
30
1
667
2.9
1970
1,059
90 a/
85
Negl.
1,234 a/
4.9
a.
Estimated.
Investment in petroleum now totals more than $1 billion in Nigeria, about
one-half of which was made by Shell-BP, by far the largest producer.
Investments in Gabon's oil industry are estimated at between $250 million
and $300 million and have been made largely by the French government
through its company, Equatorial African Petroleum Company (SPAFE). In
Angola oil company investment amounts to about $250 million.
12. Petroleum exports have become a major foreign exchange earner
for the leading producing countries. Despite a long civil war that disrupted
production until 1969, oil is now Nigeria's largest export by a wide margin,
having grown from $32 million (7% of total exports) in 1961 to $713
million (57% of the total) in 1970. Petroleum's contribution to the balance
of payments (receipts net o" related payments) has grown concurrently from
$40 million in 1961 to $369 million in 1970 (see Table 3). Petroleum
exports have also increased rapidly in importance to the Gabonese. In 1967,
oil surpassed manganese in export value and became the chief mineral
export. Over the next three years, the value of Gabon's petroleum exports
increased almost one-third, reflecting favorable world prices and increased
production. In 1970 these exports amounted to $62 million, or 35% of
the total, and became the largest foreign exchange earner, surpassing forest
products. Angolan petroleum exports rose from $15 million in 1969 - the
first year of sizable sales - to $49 million in 1970, when they ranked third,
after diamonds and iron ore.
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ESTIMATED WEST AFRICAN OIL EXPORTS, 1970 (Thousand barrels per day)
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Table 3
Nigeria: Export Earnings
and Government Revenues from Petroleum
Million US $
Year
Value
of Oil
'E ports
Oil Industry's
Net Contribu-
tion to Balance
of Payments a/
Contribution
to Govern-
ment Revenue
Percent of
Total b/
Revenue
1961
32
40
20
5
1962
48
50
24
6
1963
56
39
14
3
1964
90
70
34
7
1965
191
91
36
7
1966
257
122
53
10
1967
2G2
136
76
17
1968
104
81
45
10
1969
367
149
78
'13
1970
713
369
280
27
1971' c/
N.A.
N.A.
772
58
a. Nigeria s receipts net of related payments.
b. Determined by comparing petroleum revenues for each
calendar year with total government revenues for the fiscal
year beginning 1 April.
C. Estimated.
13. Petroleum's contribution to government revenue has also grown
dramatically because of increased production and new tax agreements
negotiated in the producing countries. In Nigeria, petroleum contributed
an estimated $772 million, or nearly three-fifths of government revenue,
in 1971 (see Table 3). The US Embassy estimates that Nigerian government
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revenues from petroleum will exceed $2 billion by 1975. Gabonese
government revenues from petroleum reached an estimated $11 million in
1971 - some 15% of total receipts. Government revenues from oil profits
are less important in Angola than in Nigeria and Gabon because large
exploration and development costs are still being written off. Angolan oil
revenues probably approximated $16 million in 1971 - only 4% of the
government's expected total.
Negotiations for Further Financial Gains
14. Nigeria has taken the lead in West Africa in demanding more
benefits from and more control over oil resources. New tax agreements
negotiated with the oil companies in November 1970 raised payments to
the government, and agreements in April 1971 both raised and accelerated
payments. Nigeria became the eleventh member of the Organization of
Petroleum Exporting Countries (OPEC) in July 1971 and has been
supporting other OPEC members in seeking further government part.;-- pation
in petroleum concessions. Its first participation agreement was negotiated
in April 1971 with the French Petroleum Research and Exploitation Co.
(SAFRAP). In return for permission to resume production - stopped soon
after the civil war began in 1967 - SAFRAP had to yield a 35% ownership
share to the Nigerian government. This share will gradually increase, reaching
50% when SAFRAP's production hits 400,000 bpd, ten times greater than
its output at the end of 1971. In September 1971, Lagos exercised an
option to take one-third participation in the Italian Petroleum Enterprise
(AGIP)-Phillips operation. Agreements have also been reached with three
of the companies bidding for offshore concessions, giving the Nigerian
government 51% participation in any future production. The government
has indicated that it intends to begin negotiations in 1972 for an equity
interest in existing concessions, but it probably will move slowly here. All
government shares in the oil industry will be held by the newly formed
Nigerian National Oil Company, for which some promising offshore
concessions also have been reserved.
15. Gabon and Angola also have negotiated increased benefits from
oil exploitation. Gabon reached new agreements with the oil companies
in 1970 and 1971, which raised the posted price and increased the
government's share of gross profits from 19% to an estimated 35%. Angola
renegotiated its agreement with Gulf Oil and began to calculate oil payments
on the basis of posted prices in 1971. It probably will try in the future
to exact increases in payments similar to those granted to OPEC countries.
16. Benefits to the West African producing countries from oil
exploitation almost certainly will grow rapidly because of the industry's
continued expansion and the more militant stand recently taken by OPEC
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in demanding higher prices from the international companies. Although
Nigeria currently is the only West African member of OPEC, the
organization's demands undoubtedly will also encourage the other West
African producers to seek greater benefits. Nevertheless, the demands of
the West African countries have not been extreme so far.
Conclusions
17. West African oil output remains relatively small, but it is growing
considerably faster than the world total. About 1.8 million bpd were
produced in 197 1, largely for sale to Western Europe, and the arer- has
promise of growing in importance as an oil exporter, particularly if the
intensive exploration efforts now under way have some success. With
production in 1971 averaging 1.5 million bpd, Nigeria rose in a decade
from an insignificant position to ninth place among world producers and
seventh place among oil exporting countries. Gabon and Angola currently
provide nearly all of the remaining West African output. By 1975 the three
main producing countries combined may well double their 1971 output.
In addition, the Zaire Republic is expected - on the basis of recent
discoveries offshore - to be producing on a commercial scale by 1973.
Moreover, some of the other newly discovered but still undeveloped oilfields
probably will be found to be economically exploitable in the 1970s because
of rising prices and the likelihood of new technology to lower offshore
drilling costs. If West African oil exports rise as anticipated and the world
total grows at the expected annual rate of some 12.5%, West Africa could
account for 7% of global exports by 1975, compared with 5% in 1970.
18. Petroleum development has substantially changed the economic
prospects for the three main producing countries in West Africa and has
given hope to others. In just a few years, oil has become the leading export
in both Nigeria and Gabon and has become much more important in
Angola's exports. Petroleum's contribution to government revenue in these
countries also has increased dramatically. Financial benefits for West African
producers will continue to grow rapidly as output is increased to help meet
the soaring world demand for high-quality oil and as the OPEC countries
probably continue to use concerted action to gain increased revenues per
barrel from the oil companies.
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APPENDIX A
Exploration in West Africa
A ngola The most important discoveries have been made by Gulf Oil offshore of
the Cabinda District. The only other producer is Petrangol, which holds
several small concessions onshore around Luanda that account for less than
15% of total production.
Cameroon The offshore area is adjacent to the active Nigerian oilfields, but worthwhile
finds have roved to be elusive. Petroleum Research and Exploitation
Company of Cameroon (SEREPCA) has found indications but no workable
deposits of offshore oil; it has suspended operations. Amerada, Shell
Exploration and Exploitation Company (CAMREX), Mobil, Gulf, and
Occidental also hold concessions, but most of the companies are inactive.
Congo The onshore field, Pointe-Indienne, is owned by SPAFE and is rapidly being
depleted. Offshore concessions were awarded in 1968 to SPAFE and AGIP.
Oil was discovered by SPAFE in 1969, and commercial production is
expected in 1972.
Dahomey Union Oil has discovered oil offshore, but exploitation has not been
undertaken. Shell Oil and Pivipoy International Oil Company received
concessions in 1971.
Equatorial Guinea Oil has been found but not in commercially significant quantities despite
drilling by several companies. Because of a boundary depute with Gabon,
the CONOCO-Gulf-Spanish Petroleum Company (CEPSA) consortium
formally renounced its concession in December 1970.
Gabon Eight firms are currently producing or exploring. Shell-Gabon, Mobil, and
SPAFE are producing; Gulf, Texaco/Chevron, Union Carbide, Gabon
Petroleum Corporation, and Oceanic Oil Corporation are exploring.
Gambia Exploration has been undertaken by the sole concessionaire, Senegal
Petroleum Company, but no oil has been found so far.
Ghana An exploration surge began when the government received a favorable
geological survey from a Romanian survey team. Seven company groups
hold all available offshore acreage. The Signal group made a potentially
significant offshore discovery in mid-1970.
Guinea Shell held a two-year contract to explore the whole of Guinea's continental
shelf, which it allowed to expire in 1970 after unsuccessful exploration.
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Ivory Coast A concession for all offshore exploration was awarded to a consortium of
Esso, Shell, and Petroleum Exploration and Activities Enterprise (ERAP)
in October 1070.
Liberia
Offshore concessions were awarded to Union Carbide, Frontier Petroleum,
and Chevron in 1969.
Mauritania Esso and an AMOCO-Planet Oil Company Group hold concessions and have
can, ed out exploration. Only traces of oil have been found to date. Texaco
was granted an exploration license in 1971.
Nigeria About 15 companies are active. Six - Shell-BP, Gulf, Mobil, AGIP/Phillips,
Texaco/Chevron, and SAFRAP are producing. About six hold concessions
but are not producing. Three additional companies - Occidental, Japanese
Petroleum, and Deminex -- have just completed negotiations for offshore
concessions. Two other companies are still negotiating.
Portuguese Island Ball and Collins, Ltd., was awarded an initial 18-month concession covering
Territories the land and offshore areas of the islands of Sao Tome and Principe in
May 1970.
Portuguese Guinea Esso has carried out exploration, but no oil has been found.
Senegal Texas Gulf Sulphur-West African Petroleum Company (COPETAO) made
an offshore discovery in June 1970, but no exploitable field has been found.
Esso Exploration has made a number of unsuccessful drillings. Shell also
holds concessions.
Sierra Leone Three offshore exploration licenses were issued to Occidental, Union
Carbide-Interocean, and Clinton International in 1970.
Spanish Sahara Onshore concessions were first awarded in 1960. Exploration had been
abandoned by 1969 but was resumed at a modest level in 1971. Offshore
concessions are held by Union Carbide, National Aragonese Petroleum
Enterprise (ENPASA), and a Gulf-CEPSA-Continental consortium.
Togo Union Carbide consortium struck oil in late 1969 but has not discovered
commercial quantities.
Zaire Republic A Gulf-led consortium has discovered potentially important reserves ten
miles offshore. The offshore field could produce 40,000 barrels a day, and
Gulf expects production on a commercial scale by 1973. Zairian Company
of Petroleum Exploratory Research (SOZAREP) group is prospecting
onshore near the coast.
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Refineries in West Africa
Nine West African countries now have refineries. In the producing
countries of Nigeria, Gabon, and Angola, the refineries process local crude
oil mostly to meet domestic requirements. The Nigerian refinery was forced
to close in July 1967 because of war damage, but it reopened in May 1970.
Currently the refinery is able to meet most of Nigeria's needs for refined
petroleum products other than premium-grade gasoline. Imports partially
fill the latter need. The Gabonese refinery was built as a joint venture of
members of the Central African Customs and Economic Union (' IDEAC),
and refined products are exported to Chad, the Central African Republic,
Cameroon, and Congo, as well as being consumed locally. Angola's refinery
is large enough to meet current domestic requirements. If it is expanded
and a second refinery is built, as now planned, Angola should remain
self-sufficient in refined petroleum products throughout the 1970s. In the
non-producing countries the refineries were established, as part of
industrialization programs, to process imported crude oil for domestic
consumption. Details on the area's refineries are as follows:
Country
Location
Ownership
Capacity
(bpd)
Angola
Luanda
Angola Oil Co.
14,000 a/
Lobito b/
(PETRANGOL)
Portuguese Company
for Exploitation of
Angolan Petroleum
(ANGOL)
13,000
Gabon
Port-Gentil
Equatorial Refining
16,000
Ghana
Tema
Co.
Ghanian-Italian
30,000
Ivory Coast
Vridi-Abidjan
Petroleum Co.
Ivorian Refining
19,000
Liberia
Monrovia
Society
Liberia Refining Co.
10,000
Nigeria
Port Harcourt
Nigerian Petroleum
55,000
Senegal
Dakar
Refining Co.
African Refining Co.
12,000
Sierra Leone
Freetown
Hafian Refineries
10,000
Zaire Republic
Moanda
Congolese-Italian
13,000
Refining Co.
a. Being expanded to 20,000 bpd.
b. Scheduled to begin operation in 197;.
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