While global oil prices are down in 2015 and U.S. production is off its recent highs, net increases in U.S. production over the last decade have impacted economies and oil markets around the world, including oil-rich countries in Africa. Algeria, Angola, and Nigeria, all members of the Organization of the Petroleum Exporting Countries (OPEC), each send a share of their crude oil exports to the United States. This article describes the impact of the U.S. energy boom on Africa, particularly sub-Saharan Africa, and discusses some of the challenges and opportunities that have resulted from the fall in U.S. demand for Africa's oil resources. Shifts in trade patterns demand a refocusing of U.S. security measures and an increase in strategic collaboration, as opposed to isolation.
Due to technological breakthroughs like hydrologic fracturing, and a business friendly environment, the United States has experienced a steady increase in unconventional sources of energy, specifically light tight oil and shale gas, over the past decade. While global oil prices have declined more than 50 percent since mid-2014 (closing at below $50 in September 2015) and U.S. production is off its recent highs, net increases in U.S. production over the last decade have impacted economies and oil markets around the world. As of May 2015, for example, the United States has raised local oil output from 5.07 million barrels per day (bpd) in 2007 to an average of 8.71 million barrels per day in 2014. (1) Natural gas production is also surging, and the U.S., which in the last decade built gas import infrastructure, is now expected to become a net exporter by 2017. (2) As a result, analysts are predicting that the United States will become a net energy exporter by 2022. (3)
As conventional and unconventional sources of energy have continued to flow, several reports have examined the impact of the U.S. energy boom on the national economy and on our relations with the Middle East and other petroleum-dependent countries. (4)
However, there has been much less attention paid to how the U.S. shale boom has affected Africa, particularly the oil-producing countries in the region. Algeria, Angola, and Nigeria--all members of The Organization of the Petroleum Exporting Countries (OPEC)--send some share of their crude oil exports to the United States, although the amount varies. This article describes the impact of the U.S. energy boom on Africa, particularly sub-Saharan Africa, and describes some of the challenges and opportunities that have resulted from the fall in U.S. demand for Africa's oil resources. Shifts in trade patterns demand a refocusing of U.S. security measures and an increase in collaboration, as opposed to isolation.
The continent of Africa hosts 54 countries. A significant number of these have vast reserves of natural resources including minerals, diamonds, oil, and gas. Table 1 below provides information on those countries that produce oil, their estimated reserves, the dependence of their economies on oil revenue, and the share of their energy exports to the United States.
Prior to recent domestic developments in unconventional fossil-based resources, Africa played an important role in U.S. strategy to diversify its energy base over the last twenty years. In particular, "West Africa has increasingly formed a core part of a broader American global strategy of energy security through diversification," and "the U.S. has emerged over the last decade to stand now as one of the key players in African energy politics." (5) Now, Africa, particularly West Africa, remains one of the areas of the world most adversely impacted by the U.S. energy boom, particularly Algeria, Angola, and Nigeria--all members of OPEC.
Crude oil exports from Africa to the United States have fallen from a high of 2.4 million barrels a day in 2007 to 0.29 million barrels a day in 2014, which represents an 87.7 percent decline (see Figure 1). (31) As of June 2015, only one country, Angola, was among the top ten suppliers (101 thousand barrels per day) of crude oil to the United States. (32)
Nigeria, a member of OPEC, has experienced the biggest blow from rapidly declining U.S. oil imports. In 2005, Nigeria was the fifth largest U.S. supplier. Approximately 70 percent of Nigeria's oil production is offshore. (33) The U.S. was an attractive market for Nigeria's high quality, light sweet crudes (Bonny Light and Brent Crude) that are low in sulfur content and most similar in composition to shale oil, particularly that produced in North Dakota's Bakken field. In 2010, 43 percent of Nigeria's oil exports (amounting to 373.3 million barrels) were sent to the United States. By 2014, Nigeria's oil exports to the U.S. had fallen to 33.6 million barrels in the first six months of the year, reflecting a 91 percent decline. (34) By July, Nigeria had completely stopped sending oil to the United States. (35) The United States changed from being the largest importer of Nigerian oil in 2012 to the 10th largest in 2014, accounting for 1 percent of U.S. total oil imports.
In addition to the U.S. energy boom, Nigeria is suffering from low global oil prices and reduced demand from European refiners, which import around 40 percent of Nigeria's oil. (36) While Nigeria has increased exports to India (overtaking Saudi Arabia as the largest supplier of oil to India), there are new and high-tech refineries in Asia that process heavier, cheaper grades, leaving Nigeria in search of a solid customer base. (37,38)
In addition to falling demand and soft prices, Nigeria's production and export trade is adversely impacted by crude oil theft in the Niger Delta, which is estimated at 400,000 barrels per day, and amounts to 10 percent of the country's production. By some estimates, halted operations and massive oil leakages have resulted in revenue losses totaling an estimated $1.7 billion per month, which represents 7.7 percent of Nigeria's GDP. (39)
Algeria, the second largest oil producer in Africa and a member of OPEC, is heavily reliant on its hydrocarbon sector, which accounted for roughly 60 percent of public revenues and 95 percent of export earnings in 2014. (40) Increased U.S. domestic production of light tight oil and shale gas has adversely impacted Algeria. Similar to Nigeria, Algeria's light, low sulfur, sweet crudes are better suited for U.S. refineries than the refineries in China and India that are configured to process heavier, sour crudes. (41) In 2010, the United States was the biggest single destination for Algerian oil exports (53 percent), compared to 31 percent heading to Europe. U.S. imports of Algerian crude peaked in 2007 (244 million barrels annually), and have declined by 84 percent to 40 million in 2014. (42) In 2014, only 7.5 percent of Algerian oil exports went to the United States, compared to 72 percent to Europe. (43)
In recent years, Algeria's crude oil production has been stagnant because of delayed production and infrastructure projects. In 2013, the Algerian parliament amended its hydrocarbon law and offered more favorable tax policies and incentives in order to spur renewed foreign investment in its shale resources.
The U.S. energy boom has also impacted Angola, the third largest oil producer in Africa. A member of OPEC, Angola's oil production grew by an annual average of 15 percent over the period 2002-2008 as production started from multiple deep-water fields that had been discovered in the 1990s. Today, eighty percent of Angola's oil production is offshore. (44) Angola's economy is also almost entirely dependent on oil production, as oil exports accounted for approximately 80 percent of public revenues in 2014. In 2005, Angola was the 7th largest supplier of crude oil to the United States, accounting for 5 percent of total U.S. crude imports on average over the period 2005-2009. As of 2014, only 1.9 percent of U.S. crude imports came from Angola. In 2009, Angola sent 31 percent of its crude oil to the United States; by 2014, only 8 percent of crude oil went to the United States. (45)
Angola has responded to the U.S. energy boom and accompanying decline in imports by redirecting more of its crude oil to China and India. The lion's share (almost 50 percent) of Angola's oil exports now head to China. For the last decade, China has been aggressively securing supplies of natural resources in Africa. As early as 2004, China expanded its relations with Angola, offering loans for construction and energy projects secured with oil. (46) As of 2015, Angola is the second-largest supplier of oil to China (behind only Saudi Arabia). In addition, India has increased its purchase of Angolan oil in recent years. (47)
On a global scale, Chad is not a significant producer of oil and gas. Chad has approximately 1.5 billion barrels of oil in proven reserves (compared to 37 billion in Nigeria). (48) Chad is one of the least diversified countries, with petroleum oil accounting for over 90 percent of its export earnings. (49) While roughly half of Chad's oil is sent to the United States, over the period 2005-2010, the United States' import of Chadian oil accounted for less than 1 percent of its total oil imports. (50) However, most of Chad's crude oil exports are sent to the United States, so the African nation remains quite dependent on the U.S. market. The United States is a leading investor in Cameroon, largely through the Chad-Cameroon pipeline.
Located in West Africa, Equatorial Guinea also has oil and gas reserves. As of 2014, Equatorial Guinea had proven oil reserves of 1.1 billion barrels. Oil production is the basis of the country's economy, accounting for 99 percent of export revenues (in 2011) and 90 percent of all government revenues (in 2015). (51) In 2014, total oil production averaged almost 270,000 barrels per day, which is significantly lower than the 2007 peak of 369,000 barrels per day. Equatorial Guinea exports nearly all of the oil...