Saturday, June 04, 2005

A Rich Country Being Stripped of its Wealth

British firms among those to profit from energy bonanza in Equatorial Guinea

It has got a sad record of disease, brutality and corruption, and fewer inhabitants than Sheffield. But Equatorial Guinea is one of the key targets of the west's new "scramble for Africa". So much so that a gang of British businessmen, including Sir Mark Thatcher, were accused last year of financing an armed coup to get their hands on its wealth.

This mini country located under the armpit of the West African coast has immense quantities of oil; it is currently exporting $4.5bn worth (about £2.5bn) a year. Yet such an astonishing bonanza appears to have done most of the country's citizens no good. The IMF reported bluntly in May: "Unfortunately, this wealth has not yet led to measurable improvements in living conditions."

Who then, is getting the benefit? One of the answers can be found in Equatorial Guinea's recent big British deal.

BG Plc, formerly British Gas, takes full-page prestige advertisements in New Statesman, the Labour magazine, to boast that it intends "to play an important role in securing Britain's energy supply".

The company says it hopes to make considerable profits on what is being touted as the fuel of the future. It is buying up nearly 60m tonnes of liquefied natural gas - the entire planned output for 17 years of Equatorial Guinea's new LNG plant - an amount that is worth about $15bn at today's prices.

The company will not disclose what it will be paying for the gas, despite having signed up to the Blair government's idealistic scheme, the Extractive Industries Transparency Initiative, under which companies and governments are urged to come clean about oil payments.

The firm provided a limited amount of information, however, from which some calculations can be made.

If the price of LNG on the US market stays below $182 a tonne, the company says it will buy it at source for up to $155, and make only a moderate profit. But if the price soars over the coming years - and traders hope it might in a world starved of clean energy - BG could make an extraordinary windfall.

But asked how much of that extra profit will go back to Equatorial Guinea and the company pulls down the shutters. If the answer is "none", on the information available, the government of Equatorial Guinea may see little more than $65m a year from the LNG deal.

The government has been allowed only a 25% share in the LNG plant itself. The rest belongs to the Houston-based US oil giant Marathon. (In a similar LNG deal in Nigeria, the Nigerian state oil company got twice as big a shareholding.)

Guardian Unlimited

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