DAKAR, July 13 (Reuters) - The Gulf of Guinea - a growing source of oil, cocoa and metals - spans more than a dozen West African countries, some ravaged by civil wars and coups in recent years. The region also faces growing threats from piracy and drug smuggling.
The Gulf runs from Guinea on Africa's northwestern tip to Angola in the south and includes Nigeria, Ghana, Ivory Coast, Democratic Republic of Congo and Gabon.
NEW ENERGY FRONTIER?
Gulf nations produce more than 3 million barrels of oil a day, about 4 percent of global output, mostly for European and American markets. The bulk comes from OPEC member Nigeria (2.2 million bpd).
Smaller producers are Equatorial Guinea (200,000 bpd), Republic of Congo (340,000 bpd), Gabon (230,000 bpd), Ghana (80,000 bpd), Cameroon (59,000 bpd), Ivory Coast (40,000 bpd) and Niger, which started pumping about 20,000 bpd early this year.
Ghana, which began producing oil in December 2010, is struggling to hit its target of 120,000 bpd by next year due to underperformance and production delays at some major wells. Sierra Leone and Liberia hope offshore drilling will produce oil for them.
Russia's second largest oil producer LUKOIL plans to invest ${esc.dollar}100 million in exploration of its offshore block in Sierra Leone.
Washington estimates the Gulf of Guinea will supply about a quarter of U.S. oil by 2015 and has sent military trainers to the region to help local navies secure shipping as concerns over piracy increase.
What to watch:
- Drilling results: Energy companies African Petroleum Corp and Anadarko said in February they had struck oil off Liberia and Sierra Leone that could be commercially viable, raising hopes of an energy bonanza in the war-scarred states.
The results of other exploration efforts by Tullow and Anadarko off Ghana, Sierra Leone and Liberia, and Bowleven , Kosmos Energy and Victoria Oil and Gas in Cameroon, will help define the region's potential.
- Security: The security of operations and shipping is a key risk, with piracy on the rise in the area. The United Nations has said there was an increase in West African piracy in 2011, mostly off Nigeria but also off neighbouring Benin.
- Oil sands: Italian oil major Eni has said it will launch a pilot oil sands project in the Republic of Congo this year. The company signed a ${esc.dollar}3 billion deal to develop the project in 2008, giving it access to estimated reserves of between 500 million and 2.5 billion barrels.
COCOA HUB
More than three-quarters of the world's cocoa comes from Gulf of Guinea nations, most from Ivory Coast and the rest from Ghana, Nigeria, Cameroon and others.
Cocoa output from the four producers hit a new record in 2010-11 of more than 3.2 million tonnes due to ideal weather and improved husbandry techniques, contributing to a slide in global futures prices. Output is expected to be lower this season after a long drought in Ivory Coast and Ghana and pest attacks in Cameroon.
What to watch:
- 2011/2012 harvest: Dry and windy weather in parts of the region, particularly Ivory Coast, has depressed forecasts for this season's crop. Although Ivorian port arrivals are slightly ahead of last season's at the moment, that is only because last year's conflict temporarily held up hundreds of thousands of tonnes from being exported. They are widely expected to end the season down, and output is also lagging in Ghana and Cameroon. The International Cocoa Organization (ICCO) has predicted declines in West African output across the board this season.
- Ivorian cocoa reform: Ivory Coast has changed regulations in an effort to guarantee farmers a price floor for their cocoa, but the reform lacks enthusiastic support from leading exporters. If the reform effort encounters problems, it would jeopardise Ivorian efforts to improve farmer incentives, husbandry and reinvestment in long-neglected plantations.
Successful reform, however, would be seen as broadly positive, potentially breathing new life into neglected plantations and opening the door to enhanced debt relief. The country abandoned a previous effort to regulate the market more than a decade ago after it was undermined by corrupt bureaucrats, who took bribes at the expense of farmers the regulation was meant to protect.
- Ghana's cocoa regulator Cocobod is investigating a shortfall of around 70,000 tonnes of beans between official cocoa purchases and its inventory after buyers reported inflated volumes.
IRON ORE AND OTHER MINERALS
Gulf of Guinea nations - already home to top bauxite exporter Guinea and major gold producer Ghana - have attracted billions of dollars of investment from resource firms eager to dig up vast unexploited iron ore reserves.
The region could eventually produce nearly 10 percent of the world's iron ore, up from less than 1 percent last year, according to the U.S. Geological Survey.
Investments announced in 2010 from BHP Billiton , Rio Tinto , Vale and Chinalco amount to around ${esc.dollar}10 billion.
Liberia and Sierra Leone recently started iron ore shipments. Cameroon's large Mbalam deposit and Guinea's Simandou project could start shipping as early as 2014.
What to watch:
- Resource nationalism: Countries in the region are raising royalties, toughening up mining laws and undergoing contract reviews. Guinea is the latest, saying it is planning to review and amend contracts to ensure accords are fair.
Congo's state firm Gecamines is also planning an audit of joint ventures to raise money for expansion, while the government is planning to review its mining code and mining contracts to increase the state share and revenues in mining projects.
Landlocked Mali is also seeking to raise the state share in mining contracts.
- China is making moves on some of Africa's biggest iron ore resources so as to break Rio, Vale and BHP's grip on iron ore supply and prices. China's Hanlong Mining has made a deal to buy Australia's Sundance Resources, which owns the Mbalam project in Cameroon, for ${esc.dollar}1.3 billion, while Chinalco is in joint venture talks with Rio over the Simandou project in Guinea.
Guinea is also in advanced talks with state-owned China Power Investment to develop a bauxite mine and build an alumina refinery, deep water port and power plant.
- Other risks in the region include tight power generation capacity, especially in countries such as Liberia and Sierra Leone - something that has interfered with mining investment in other countries, including South Africa and Chile.
Most notably, Cameroon is hoping to triple power generation by 2020 after shortages forced Rio Tinto's joint venture Alucam smelter to cut back operations in 2009.
- Elections. Polls in Congo, Liberia, Guinea and elsewhere have turned violent. New administrations may seek to alter mining laws or contracts. Sierra Leone, which saw its first shipment of iron ore in November 2011, holds a presidential election on Nov. 17, while new oil producer Ghana holds presidential and parliamentary polls in December.
PIRATES, DRUG RUNNERS AND COUPS
Piracy in the Gulf of Guinea is not on the scale of that off Somalia, but analysts say an increase in scope and number of attacks in a region ill-equipped to counter the threat could affect shipping and investment. Benin in particular is seeing an increase in activity off its coast.
The U.N. Security Council has said it is concerned about the increase in piracy, maritime armed robbery and reports of hostage-taking in the Gulf of Guinea and its damaging impact on security, trade and economic activity.
West African drug trafficking is also having an impact on the region's economies. The United Nations estimates that ${esc.dollar}1 billion worth of cocaine, destined for Europe from Latin America, passed through West Africa in 2008.
Guinea Bissau, which has become West Africa's main cocaine transit point due to its weak government, is facing considerable risks following a coup in April. (Writing by Richard Valdmanis and Bate Felix; editing by Andrew Roche)
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