Africa has been one of China’s major sources of oil over the last two decades but its share of the market is expected to decline as China looks to other suppliers, analysts say. In 2007, about a third of China’s crude oil imports came from Africa, according to the Observatory of Economic Complexity (OEC), an online data platform run by US-based Datawheel. But that share has dropped to about 18 per cent today – and is projected to fall further as Beijing sources more of the commodity from the Middle East, including Iran and Saudi Arabia. China already imports about half of its oil from the Middle East and the International Energy Agency forecasts that China’s imports from the region will double by 2035 – despite political instability in the region. In particular, China has agreed to invest US$400 billion in Iran in return for oil supplies. Work begins on Nigeria’s China-funded US$2.8 billion gas pipeline Mark Bohlund, a senior credit research analyst for New York-based REDD Intelligence, said Angola and the former Sudan were important for China’s quest to secure its oil supply in the early 2000s. At the time China was making inroads into Africa to source raw materials for its industries and markets for its products as part of its “Go Global” strategy. In 2006, five of China’s top 10 suppliers were from Africa: Angola, the Republic of Congo (Congo-Brazzaville), Equatorial Guinea, Sudan, and Libya, according to the OEC data. Other source markets from Africa included Cameroon, Gabon, Algeria, Nigeria, Egypt and Ghana. At the time, China was competing for supplies with the United States but with the shale oil revolution, the US went from the world’s largest oil importer to a net oil exporter, Bohlund said. “This means that China is the biggest client for almost all major oil exporters, including Saudi Arabia,” Bohlund said. “So, the importance of African oil exporters like South Sudan, the Republic of Congo and Angola has diminished significantly.” Angola seeks to rethink debt deal with China as oil revenue slumps By 2018, Angola was the only African nation still among the top five exporters of oil to China, supplying more than 10 per cent of the Asian giant’s total. Angola signed multibillion oil-for-loans deals with Chinese commodity traders and Beijing, becoming the continent’s largest destination for Chinese loans – accounting for about a third of all loans to African countries from Beijing. China also invested billions of dollars in oilfields in Sudan and South Sudan, both key Beijing allies, but insecurity has ground operations to a near halt. David Shinn, a professor at George Washington University’s Elliott School of International Affairs, said that when Sudan was united, China imported more than 5 per cent of its oil from the country. But that was before South Sudan seceded from the Republic of Sudan in 2011, and three-quarters of Sudan’s oilfields went with it. “[Today] Sudan has almost no excess oil to export to China and South Sudan’s production has decreased because of civil conflict in some of the oilfield regions,” Shinn said. Mike Pompeo takes aim at corruption and Chinese investment in Angola Charles Robertson, global chief economist and an emerging markets analyst for the Moscow-based investment bank Renaissance Capital, said Sudan had become “an unreliable supplier to China”. South Sudan has also given notice that it will end its partnership with China National Petroleum Corporation (CNPC), the operator of the country’s main oilfields, when its licenses expire in seven years, according to local media reports last week. These oilfields will be taken over by state-owned Nile Petroleum Corporation. CNPC owns a 41 per cent stake in South Sudan’s largest oil consortium – Dar Petroleum Operating Company, while Sinopec, another Chinese state-owned company holds a 6 per cent stake. Because of conflict in the country, Dar Petroleum produces about 110,000 barrels per day, well below its capacity, according to company records. South Sudan accounts for just a small fraction of China’s total oil imports but most of what it does produce goes to China, especially since the US imposed sanctions on some of its leaders and businesses. Winifred Michael, Sub-Saharan Africa country risk associate analyst at London-based Fitch Solutions, said South Sudan produced around 170,000 bpd, and could not reach its peak production level of around 350,000 bpd due to chronic underinvestment, frequent supply outages and damage to reservoirs as a result of the recently ended seven-year civil war. “The intermittency of oil exports from South Sudan has reduced the country’s reliability which has most likely made China more reluctant to import from South Sudan,” Michael said. She said Beijing was now sourcing from more countries, resulting in a decline in Africa’s share of those supplies. “Beijing is pursuing a strategy of import diversification so Africa’s share in China’s oil imports has in turn generally decreased,” she said. Shinn said that as China cut oil imports from Africa from a high of about 32 per cent of its imported oil to about 18 per cent, the world’s second largest economy, “has replaced that supply with oil from the Middle East, Venezuela, and neighbouring countries”. “I see no reason for this pattern to change; Africa, including South Sudan, will likely remain a less important supplier,” he said. “On the other hand, certain African minerals such as cobalt continue to be significant exports to China.”
