Recent troubles at Niger’s only oil refinery in Zinder show importance of transparency

The recent troubles at Niger’s only oil refinery in Zinder have interesting parallels in neighbouring Chad, and show how important transparency in the extractives industry remains.

In summer 2015, Niger’s Soraz refinery closed down for 45 days. The supply of locally produced fuel on the market dwindled and prices shot up. Officially the closure was because of a technical fault, but there was much speculation in the press that disagreements between the government and the CNPC (Chinese National Petroleum Company) had broken out behind the scenes. At issue appeared to be the CNPC’s reluctance to reduce the price at which it was selling barrels of oil to the refinery, despite the dramatic falls in the world oil price over the last year.
The dispute highlighted the complexity of the original production deal struck between the Nigeriens and the CNPC in 2006. While the CNPC fully owns the Agadem oil fields in the country’s remote Diffa region which supply Soraz, it jointly owns the refinery 60%/40% with the Nigerien government. Oil produced at Agadem is sold to Soraz for refining, but even though the CNPC partly owns Soraz, the price was still around $70 a barrel when the world price was hovering around $50 a barrel. Much of what Niger earns from the refinery is needed to pay the CNPC back for large infrastructure loans which were used for the construction of the refinery and oil-fields. Given that local demand for refined oil is estimated at a paltry 7000 bpd and unlikely to increase in the short-term, and the CNPC has no immediately workable plans for export (an easier way to make a profit), it is hard to understand why one arm of the company (Agadem) was deliberately starving another arm (Soraz), particularly as the latter was expected to be repay the former.

Chad’s dispute with the CNPC was equally complex. It too started with a dispute over prices – shortly after the Djermaya refinery opened in late 2011 Chad claimed that the CNPC was selling locally-refined fuel at too high a price, and closed down the refinery in protest. In 2013, the row mushroomed when Chad claimed it had uncovered oil spills and environmental damage at the company’s Ronier production site. Before the dispute was finally settled, Chad had fined the CNPC an eye-watering $1.2bn, seen off the managing director of the company, held up exportation plans for more than a year and revoked five exploration licenses.

Charting these cases and others during the research for my recent book ‘Africa’s New Oil’ I found evidence to suggest that the traditional narrative of China as the ‘neo-coloniser’ and Africa as ‘the exploited’ is becoming outdated. As these stories show, African governments are able to stand up to China when investments don’t appear to be bearing fruit, although Niger has been less pugnacious in its approach than Chad.

However there are still many problems associated with the secrecy in which these deals are conducted. The row between Niger and the CNPC clearly highlights the complexity of the deals – in this case where the fundamental details about prices and tax obligations are either apparently missing or at least obfuscated. Although the CNPC does comply with the EITI teams in both countries to supply data on tax disbursements, the original contracts signed with the CNPC in Chad and Niger have never been made public. In Niger, where the constitution states that natural resource contracts should be published, this has become a major political issue; opposition politicians recently tried to get the president Mahamadou Issoufou charged with treason because he has not fully disclosed the details of a deal to run the country’s uranium mines with the French nuclear giant Areva. These two tales from Chad and Niger clearly show that this lack of transparency makes it almost impossible for citizens (and journalists!) to understand how the deals were ever intended to make financial sense for either party.

This blog was written by Celeste Hicks, freelance journalist and author of ‘Africa’s New Oil; Power, Pipelines and Future Fortunes’.