On August 14, a compressor failed at the Soraz oil refinery near Zinder, Niger, crippling one of the very few pieces of industrial infrastructure in one of the poorest countries in the world.
The thing is, there may never have been a compressor blowout.
According to multiple energy-industry sources who spoke with Business Insider, the shutdown of the Soraz refinery — which has driven up gas and cooking-oil prices throughout Niger and pushed parts of the country of 16 million to the edge of a serious fuel shortage — was a deliberate decision by the refinery’s state-owned Chinese operators and co-owners.
“The compressor is just to tell people something, but there are many problems,” an energy-industry expert told Business Insider. “The real problems are behind the compressor.”
The shutdown has been the subject of widespread speculation inside Niger. One headline on the news website TamTam Info framed the issue this way: “Halting Production at Soraz: The Chinese Want to Overthrow the Government.”
That may be hyperbole, but the refinery shutdown is still the likely result of a deliberate Chinese strategy, one that Niger is struggling to counter.
China conducts nearly $200 billion in annual trade with Africa. Its companies have dug over 200 oil wells in Niger since 2010, discovering a billion barrels of oil in the process. Chinese companies built the Soraz refinery and the domestic pipeline leading to it.
“China put in the investment that all the French and the US companies didn’t,” one Niamey-based energy expert told Business Insider. “They did what Exxon didn’t do in 30 years.”
But Chinese investment can have a price. The standoff over Soraz shows how unprepared even fairly stable and democratic African governments can be in dealing with China.
And it reveals the consequences of Chinese state-owned companies trying to import its domineering way of doing business to far different political, economic, and social contexts.
Soraz shut down amid tensions between Sonidep, the Nigerien state petroleum company, Soraz, and the China National Petroleum Corp. (CNPC).
The refinery, which opened in 2011, is about 350 miles from the oil fields in the Diffa region in eastern Niger. Soraz is connected to the oil fields through a domestic pipeline that ends at the refinery. For internal Nigerien political reasons, the refinery was constructed in an area that’s far from the nearest export pipeline, which begins in neighboring Chad.
The pipeline and refinery are set up in a way that makes it difficult to get Nigerien oil to the international market. The infrastructure, however, does at least ensure that Niger can achieve a degree of energy independence that most developing nations can only dream of.
But a toxic dynamic has recently taken hold. For reasons even insiders can’t quite explain, Sonidep owes Soraz some 40 billion West African Francs, or roughly $68 million. Meanwhile, Soraz is nursing its own gaudy debt owed to the CNPC, perhaps as much as $100 million.
The first debt is likely attributable to Nigerien government dysfunction. Niger experienced its latest military coup in 2010 and is in the midst of what has so far been a successful democratic transition, with open national elections scheduled for early next year. But government remains opaque and unaccountable, particularly on financial matters.
The second debt — the one that Soraz owes to CNPC — is the partial result of financing arrangements on the refinery, which were being renegotiated as of 2014 and are widely considered to be favorable to Beijing.
And it has exacerbated by a related problem: Under a 2012 agreement, Soraz must purchase oil at prices fixed in 2012 at about $70 a barrel. This means that in times of price spikes, Niger has some of the cheapest gas in West Africa.
But when oil plunged to under $50 a barrel in mid-2015, the refinery, and the country at large, was placed at a huge disadvantage.http://uk.businessinsider.com/niger-oil-and-chinese-investment-in-africa-2015-9?r=US&IR=T