Energy, Trade and Investment

By George L. Kirkland, President
ChevronTexaco Overseas Petroleum Inc.

Leon H. Sullivan Summit

Abuja, Nigeria

Good morning and welcome to this third day of the sixth Sullivan Summit. It's great to see so many friends and associates who hold Africa's interests close to their hearts.

This is something of a homecoming for me. For much of the 1990s, I lived and worked in Nigeria. And I was continually impressed by the optimistic determination of the African people, often in the face of great obstacles.

I saw both hard work and hope, the two main ingredients of Leon Sullivan's philosophy of self-help and self-determination. And, like Leon, I came to believe that the future of the continent continues to lie in successfully developing increased trade and investment.

I think it's important to note that today's theme of "Energy, Trade and Investment" is well chosen because energy companies have played a significant role in Africa's economic development for a long time. In fact, energy and mining has accounted for as much as 80 percent of foreign direct investment.

In the last decade alone, investment in oil and gas exploration has increased Africa's oil reserves by 25 percent, setting the stage for an extraordinary period of new growth. Over the next 10 years, Africa's oil-producing capability could increase by more than 3 million barrels per day, according to Cambridge Energy Research.

Clearly, Africa's energy star is rising. So I'd like to talk for a few moments about the three primary areas of focus for future investment:

  • Developing the deepwater discoveries;
  • Building new gas projects; and
  • Keeping Africa's established oil areas going strong.

And then I'll offer some thoughts about the broader trade and investment opportunities and challenges. And I hope this will help to stimulate a good dialog as the day unfolds.

Turning first to the deepwater, one recent study forecasts that oil and gas investment in these frontier areas will grow to more than $5 billion per year in 2007.

Indeed, deepwater Africa will likely become the world's most important offshore oil province, attracting even more investment than the North Sea or the Gulf of Mexico, according to the consulting firm Douglas-Woodward.

But this will be more than just a great energy story. As Africa becomes a primary proving ground for deepwater systems, this will be a great technology transfer story, as well.

As for natural gas, local markets have historically been too few, distances to outside markets too great and export proposals too expensive. With nowhere to go, gas has been left idle, or flared as a byproduct of valuable oil production.

However, in the next 20 years, world demand for gas is expected to grow 70 percent, and the African energy industry is geographically well positioned to capture some of that huge market.

We're entering an era when Africa's gas sector will be distinguished by new economic benefits -- instead of by the waste and environmental costs of flaring.

Technology will play a key role here too -- and in fact, offshore Africa may become the site of the world's first floating facilities for exporting liquefied natural gas.

As all of this is happening, the industry will also keep Africa's established oil and gas areas going strong, concentrating a big share of capital and technology on areas of proven value.

These include Angola Block 0, for example, shallow-water Nigeria, the Niger Delta, the Congo and others, which have produced Africa's energy resources for many years. And this strong core of conventional operations will continue to pay dividends to Africa today while the deepwater and gas sectors build for tomorrow.

As for ChevronTexaco's part in all of this, we intend to remain a leader in African energy. With our partners, we plan to invest $20 billion in African projects over the next five years.

This includes projects like the Agbami Field in Nigeria's deepwater, which is aiming to produce 250,000 barrels of oil per day by 2008. And our ongoing developments in Angola's deep water Block 14 will add more than 200,000 barrels of new daily production by the end of the decade.

Our Escravos gas to liquids project with the Nigerian National Petroleum Corp. is expected to yield more than 30,000 barrels per day of clean fuels as early as 2005. And we're continuing to work with partners on the West African Gas Pipeline project, and on proposed LNG projects in both Nigeria and Angola.

As these projects go forward, energy companies will continue to provide training and development for thousands of people while also devoting a larger share of their project spending to local content.

And as a complement to this, the energy companies -- and especially ChevronTexaco -- are becoming major supporters of small- to medium-sized enterprises, the lifeblood of any thriving economy.

Of course, the future of African oil and gas has major implications well beyond Africa itself. And in fact, all three of the main areas of oil and gas development that I've outlined have great strategic importance to the larger world.

African oil throughout the 1990s accounted for about 7 percent of global oil output, and contributed a great deal to oil market stability as one of the more reliable supply options. And the world's energy consumers have been the beneficiaries. African oil has helped to enhance the supply diversity -- and therefore, the energy security -- for both local and the world's growing economies.

And this will continue to be the case. Indeed, by the end of the decade, 25 percent of oil imports into the United States will come from Africa, more than twice today's level.

So we've got quite a time ahead of us in African energy. But of course, the continent needs all kinds of business partners, not just oil companies. And this brings us to the larger issue of trade and investment.

Many of us know Africa has great potential and great opportunities. Unfortunately, foreign direct investment in Africa remains weak. So we need to turn that around; we need to do more to change investor perceptions of Africa.

Someone once said that capital has no courage. Companies need to know that investments are secure, with a solid chance at an appropriate return. So the more we do to help them see the possibilities of Africa, the greater the likelihood that capital will find its courage.

Those of us already deeply involved in Africa and who benefit from our involvement here need to work harder to promote African economic development. I've already mentioned utilizing more local content and enhancing employee training and development. But we must also become advocates for Africa by spreading the word that Africa is a good place to invest.

Combined with government actions to improve the business climate and encourage more foreign investment, I believe our actions can help make the dream of an "African Renaissance" a reality.

Indeed, the time has never been better for companies to consider new ventures in Africa. The Africa Growth and Opportunity Act, with its special focus on small and medium enterprise, has cleared some of the major hurdles that discouraged trade and investment.

Even more important: Africa's heads of state are working harder than ever to build infrastructure, expand trade and create a magnetic investment climate for the continent. They're committed to seeing Africa provide more stable fiscal regimes, fair and reasonable terms, sanctity of contracts, transparent business practices and access to dependable infrastructure.

And they are vigorously supporting the New Partnership for African Development (NEPAD), with its Peer Review Mechanism, raising hopes for a new period of greater transparency on the continent.

Of course, NEPAD isn't just about business. Its goals are broad and ambitious -- they include improving health, ending war, increasing democracy and improving the status of women, among other priorities.

Indeed, they mirror many of the goals of the Sullivan Principles. But the architects of NEPAD also know that the social, political and economic agendas are inter dependent. And this is why they're committed to making sure Africa becomes a full partner in the global economy.

So let's join with them today in that commitment. Let's take advantage of our sessions and workshops over the balance of the day and seek new ways - no matter how large or small -- to advance trade and investment in Africa.

Thank you.

Updated: July 2003