quote:

Originally posted by MpigaKura©:
Kenya: China Selling Off Oil Rights It Got for Free

February 25, 2007
Posted to the web February 26, 2007

Nairobi

There was outrage among European oil exploration companies interested in Kenya when it emerged last week that the state-owned National Oil Corporation of China - CNOOC - has quietly put out notices offering to farm out to third parties some of the oil exploration blocks granted to it by President Mwai Kibaki in April last year.

The EastAfrican has seen a brochure the Chinese company distributed at the London Africa and Mediterranean Scout Check meeting recently.

In an unprecedented act of generosity, the government of Kenya last April gave the Chinese exclusive rights over a total of six out of 11 available blocks, including the hotly contested Blocks 9 and 10A in the Mandera area.

Major European oil exploration companies have protested that they were unable to access Kenya even as the country emerges as the new frontier in the ferocious global battle between Europe and China for the world's oil resources.

So dominant has China become in the oil exploration scene in Kenya that CNOOC alone now controls 28 per cent of the total oil exploration acreage in Kenya.

The latest action by the Chinese is deeply controversial, coming only months after CNOOC refused pleas by the Ministry of Energy to partner with Cepsa of Spain or Lundin of Sweden and allow the Europeans to explore for oil in some of the acreage the Chinese were literally hoarding.

In the brochure the Chinese put out in London, they said they were willing to farm out to third parties at a fee the acreage Kenya has given them for free.

"What does the Kenya government gain in this transaction?" asked a representative of a European oil-prospecting firm that has put an application for exploration acreage.

In the brochure, CNOOC announced that it is interested in farming out a portion of its working interests in Kenya for "cash," future cost or a combination of the two; "alternatively, a proposed swap of acreage will also be considered," it adds.

In 2005, top government officials led by President Mwai Kibaki visited China and the two countries signed a memorandum of understanding committing the parties to co-operation in several sectors, including the oil industry.

Following the visit to Beijing, an application by the Spanish company Cepsa that had been on the government table for months was put in cold storage as it became clear that Kenya had fallen for the wiles of the world's new economic powerhouse.

With the door having been closed on the European companies, the government advised Lundin and Cepsa to negotiate with CNOOC to get the Chinese to accommodate them in joint-venture exploration deals - a common business practice.

However, the Chinese have not been willing to play ball. Last year, both Cepsa and Lundin wrote to the government to complain that CNOOC was not willing to accommodate them.

Why Kenya agreed to sign such a lopsided agreement dishing out privileges to CNOOC and allowing it to hoard exploration acreage at the expense of the European companies is the most intriguing aspect of the saga.

Apparently, CNOOC negotiated and signed only one complete production sharing agreement for Block L4 with the government.

The rest of the contracts were one-year study-agreements granting the Chinese exclusive access to the five blocks - with the option to relinquish the blocks at the end of the one-year period**