Dark Liquid Continent

While China and India slug it out for oil in Africa, with China running far ahead, multinational ethics seems to have taken a long dirty dip
Meha Dixit Delhi

The recent gulf of Mexico disaster has been said to be the worst oil spill in US history. This tragedy has brought to the surface the issue of Corporate Social Responsibility (CSR) of the oil companies. With this disaster, BP (earlier, British Petroleum) is now in the eye of the storm. BP (now, re-branded as Beyond Petroleum) has for long been flaunting its environment-friendly logo of an invigorating green and vibrant yellow sun, bestowing it with a halo of social responsibility. A rather deceptive halo, it seems. 
It's not just CSR which has attracted attention, but also the double standards of oil multinationals at home and in host countries. A case in point is Nigeria where oil spills have been the order of the day. Yet, the oil multinationals operating in the Niger delta have often been immune to the basic protocol of rational conduct. 

Major producers of oil in Africa are Nigeria and Angola. Nigeria accounts for the eighth largest oil reserves in the world. Recently, the Organisation of Petroleum Exporting Countries (OPEC) stated, "More than three-quarters of the world's proven oil reserves are located in OPEC member countries, with Nigeria accounting for 3.6 per cent of the total." Sudan is sub-Saharan Africa's third biggest oil producer. 

Other oil producers in Africa include Gabon, Equatorial Guinea, Congo-Brazzaville, Chad, Cameroon and the Democratic Republic of Congo (DRC). In recent times, a number of African countries have made oil discoveries. Oil has been found in Uganda, off the coast of Ghana and off-shore from Sierra Leone. Africa has approximately 10 per cent of the world's oil reserves. 

There are a number of factors responsible for Africa's emergence as an attractive destination for oil. First, oil in the continent is of high quality, low in sulphur, particularly in the Gulf in Guinea. Next, unlike Saudi Arabia and some Gulf states, oil markets in Africa are open to foreign participation. Third, political instability in the Middle East has led to countries like the US, China, India and other Asian and European nations, to explore options in Africa. Fourth, most new discoveries are located offshore, not in the vicinity of potential conflict zones. John Ghazvinian, in his book, Untapped: The Scramble for Africa's Oil (2007), argues: "African oil is cheaper, safer and more accessible, and there seems to be more of it every day."

A number of Asian countries, besides the US and Europe, particularly India and China, are engaged in a scramble for Africa's oil. As for India, its energy security policy has centered on acquiring overseas energy assets. India accounts for approximately 3.5 per cent of the global crude consumption and is ranked as the fifth largest energy consumer in the world. According to the International Energy Agency, it is set to become the third largest oil importer after the US and China before 2025, with its demand for energy projected to almost double by 2030. 

Almost a quarter of India's crude comes from Africa. Currently, 30 per cent of India's energy requirements are met by oil, with 70 per cent of it being imported. Early this year, in order to augment India's attempts at acquiring energy security, Union Petroleum Minister Murli Deora visited four African countries: Angola, Nigeria, Sudan and Uganda. In February 2010, Deora said that India imports around 10 per cent of its crude oil needs from Nigeria; India is Nigeria's second-largest crude oil buyer. 

In recent years, India has been confronted with competition from Chinese companies, losing out on bids in the energy-rich regions. A case in point is the Chinese National Petroleum Corporation (CNPC). In 2005, ONGC-Mittal Energy Limited (OMEL) ended up losing a bid to CNPC for Petro Kazakhstan. Indian firms have lost out to Chinese companies in Angola and Nigeria. China has spent billions of dollars for securing drilling rights in Angola, Nigeria, Sudan; it also has exploration or extraction deals with Chad, Equatorial Guinea, Ethiopia, Gabon, Kenya, Mauritania, and the DRC. China imports a third of its crude oil from Africa. 

In 2009, Angola was ranked as the second-largest supplier of crude to China - after Saudi Arabia. China has made massive efforts to earn the goodwill of African countries. It has given Angola around $10 billion in loans, compared to approximately $70 million in Indian loans, mainly for reconstructing a railway in the southern provinces. China has a greater physical presence in Angola, with over 40,000 workers, compared to around 1,500 Indians. 

China ranks as Africa's second-largest trading partner after the US. As a gesture of goodwill, China has cancelled the debts of 30 African countries. These are some of the reasons why China has made deep inroads in the African continent. 

In 2004, Christian Aid claimed that in some cases CSR is counter-productive, "worsening relations between business and local communities". Its report, Behind the Mask: The Real Face of Corporate Social Responsibility, calls for new international guidelines to manage 'company behaviour'. Jedrzej George Frynas, the author of Beyond Corporate Social Responsibility: Oil Multinationals and Social Challenges, in a 2005 article, states, the current CSR agenda does not address the key "issues of governance and the negative macro-level effects" that multinationals (MNCs) cause in host countries. Frynas maintains that a focus on CSR could deflect attention from broader political, social and economic solutions for developmental problems. 

CSR now is basically rhetoric incorporated in the 'agendas' of most business enterprises, especially those dealing with natural resources. CSR has turned into an industry. Consultants provide services to corporations to work out CSR strategies. BP, which is now at the centre of public outrage due to the April 2010 disaster in the Gulf of Mexico, was once the vanguard of the CSR movement. From British Petroleum, it embarked on a successful image-building exercise, re-branding itself as 'Beyond Petroleum'. This self-portrayal is in the image of a green activist. Despite its 'commitment' to CSR, the evidence shows that BP neglected safety and went against regulations to increase profits. 

Moreover, MNCs are adopting 'double standards'. This becomes apparent when we compare the two cases of the Gulf of Mexico oil spill and the Bhopal Gas Tragedy, 1984. BP recently paid a hefty sum of $20 billion to the US government for the oil spill in the Gulf of Mexico. As for Bhopal, after the disaster, Union Carbide abandoned the plant and has failed to clean up the site. The ground water in Bhopal is dangerously contaminated. Although Dow Chemicals took over Carbide's assets, it has refused to take responsibility for the enormous human and ecological damage.

The next case is of oil spills in Nigeria. Nnimo Bassey, chair of Friends of the Earth International, states: "We see frantic efforts being made to stop the spill in the US. But in Nigeria, oil companies largely ignore their spills, cover them up and destroy people's livelihood and environment." 

The Niger delta comprises around 606 oilfields and it supplies 40 per cent of all the crude the US imports. The delta is said to be the world capital of oil pollution. More oil is leaked from the Niger delta's network of terminals, pipes, oil platforms and pumping stations each year than what has been spilled in the Gulf of Mexico. While the latter has attracted much media attention, little information is available regarding the destruction caused in the Niger delta. 

It is important for MNCs, including oil companies, to be transparent in their operations and not hide behind CSR rhetoric. The case of Niger delta, where locals are angry and disillusioned with the oil companies, highlights the importance of CSR. Governments need to act to make their multinationals responsible for their actions when they function in other countries, and provide adequate compensation if they cause environmental damage. Investments by China and India in community development projects would benefit African countries. Indeed, the continent's local populations should not experience mass displacement as a result of ecological disasters triggered by unethical, insensitive companies chasing nothing but greed.

This story is from the print issue of Hardnews: NOVEMBER 2010