A rich African country being
stripped of its wealth
It
has got a sad record of disease, brutality and corruption, and fewer inhabitants
than Sheffield. But Equatorial Guinea is one of the key targets of the west's
new "scramble for Africa". So much so that a gang of British businessmen,
including Sir Mark Thatcher, were accused last year of financing an armed coup
to get their hands on its wealth.
This mini country located under
the armpit of the West African coast has immense quantities of oil; it is
currently exporting $4.5bn worth (about £2.5bn) a year. Yet such an astonishing
bonanza appears to have done most of the country's citizens no good. The IMF
reported bluntly in May: "Unfortunately, this wealth has not yet led to
measurable improvements in living conditions."
Who then, is getting the
benefit? One of the answers can be found in Equatorial Guinea's recent big
British deal.
BG Plc, formerly British Gas,
takes full-page prestige advertisements in New Statesman, the Labour magazine,
to boast that it intends "to play an important role in securing Britain's energy
supply".
The company says it hopes to
make considerable profits on what is being touted as the fuel of the future. It
is buying up nearly 60m tonnes of liquefied natural gas - the entire planned
output for 17 years of Equatorial Guinea's new LNG plant - an amount that is
worth about $15bn at today's prices.
The company will not disclose
what it will be paying for the gas, despite having signed up to the Blair
government's idealistic scheme, the Extractive Industries Transparency
Initiative, under which companies and governments are urged to come clean about
oil payments.
The firm provided a limited
amount of information, however, from which some calculations can be made.
If the price of LNG on the US
market stays below $182 a tonne, the company says it will buy it at source for
up to $155, and make only a moderate profit. But if the price soars over the
coming years - and traders hope it might in a world starved of clean energy - BG
could make an extraordinary windfall.
But asked how much of that
extra profit will go back to Equatorial Guinea and the company pulls down the
shutters. If the answer is "none", on the information available, the government
of Equatorial Guinea may see little more than $65m a year from the LNG deal.
The government has been allowed
only a 25% share in the LNG plant itself. The rest belongs to the Houston-based
US oil giant Marathon. (In a similar LNG deal in Nigeria, the Nigerian state oil
company got twice as big a shareholding.)
This picture of Guinea's
government getting a poor deal repeats itself upon further investigations into
the background to the contract.
The gas, which will be
refrigerated and liquefied in the new plant, comes from the Alba Field, which
Marathon also operates. Basic figures published by the IMF this year reveal that
royalties of only 10% were due on the original Alba contract. There is a
production sharing deal as well, but under it Guinea's government receives a
paltry 5%.
Altogether, the IMF figures
suggest that in recent years Guinea's overall "take" in revenue has been only
15-30% of total oil and gas sales, while the norm in sub-Saharan Africa is
45-90%.
It is perhaps no wonder that
Marathon boasted that "this project will be one of the lowest-cost LNG
operations in the Atlantic basin". But why has Marathon got such good terms?
Part of the answer may have been uncovered in an extraordinary report by a US
Senate committee last year. In the course of investigating the corrupt behaviour
of Riggs, a Washington bank, the committee discovered a number of suspect
goings-on in Equatorial Guinea.
Teodoro Obiang Nguema, the
country's president, and his wife and son, were apparently treating themselves
to planes, big houses and shopping sprees. Millions of dollars in cash were
being lugged around Washington in suitcases.
Royalties
To get the go-ahead for the LNG
plant, Marathon was proposing to tip more than $2m the way of the president
himself. He said he owned the land on which the LNG plant was to be built, and
that the oil company had agreed on a price.
Many of the Marathon oil
royalties never reached Equatorial Guinea, but stayed in a Washington account.
There, on President Obiang's signature, they were dipped into for mysterious
transactions, including one where $34m was transferred to two unknown entities,
Kalunga and Apexside. The British bank HSBC was involved in aiding the Apexside
transactions, and some of the money went through accounts it operated in the
fiscal "black holes" of both Luxembourg and Cyprus.
HSBC refused to tell the Senate
investigators who owned Apexside, pleading local bank secrecy laws. HSBC's
Luxembourg operation advertises itself as a private banking service "to high-net
worth individuals and their families". The committee said: "The position taken
by ... HSBC ... presents a significant obstacle to US anti money-laundering
efforts."
Another British firm was
involved in questionable oil company payments.
Marathon and other US companies
handed over millions of dollars to the regime, supposedly for educational
purposes. But the Senate committee reported that most of those people funded to
study abroad "were the children or relatives of wealthy or powerful EG
officials".
Cash was distributed for UK
students via Lloyds Bank by ECL, a British geophysical consultancy, which earns
up to £2m a year advising Guinea's ministry of mines and energy on oil reserves.
Asked by the Guardian who got
the money, Alan Soulsby, an ECL director said: "It's all confidential." The
dilemma, he said, was that "it's a small country and everyone is related to
everyone else".
Marathon also paid $7.5m in
fees to hire labourers through an agency part owned by a former Guinea energy
minister, the Senate committee reported.
Secret signature bonuses are
also paid out by the oil companies, at up to $5m a time. Concerned bodies in the
west are campaigning to get the firms to "publish what you pay". But this is not
happening. The IMF reported this year that "the amount of the bonuses is
confidential".
In addition to its concerns
over the behaviour of US firms, the Senate committee was much exercised about
GEPetrol, the state oil company that holds the 25% share in Marathon's LNG
plant. The members said: "Some evidence obtained by the sub committee suggests
that GEPetrol may have one or more EG officials as part-owners."
The IMF team which went to
Malabo this year was equally unhappy about GEPetrol. The team was unable to see
audited accounts and said the operations were "not transparent".
Yet this is one of the key
bodies which handles oil revenues. According to the IMF, large sums are splashed
out on big capital projects, while too little goes on reducing the poverty of
its inhabitants. Local people are prey to dysentery and malaria, and infant
mortality rates are at least 18 times higher than in the UK, and half as high
again as in South Africa. The majority of the people do not have access to
decent water and 5% of the population is said to own 80% of the wealth.
However, an £80m investment is
planned for the expansion of the oil port of Luba. GEPetrol calls itself an
"active partner" with another British company, Incat, which has got a 25-year
concession to operate the port.
The financial relationships are
opaque. John Haden, from Worcestershire, Incat's owner, said he would not reveal
the extent of GEPetrol's planned shareholding.
And Incat's own finances are
not transparent. Although it has got a trading branch in Bristol, it is
registered offshore via trusts in Jersey, another fiscal "black hole" where
accounts and beneficial ownerships are not published and where there are no laws
against overseas bribery.
Corruption
Asked about the problem of
corruption in Equatorial Guinea, Mr Haden said: "Yes, but what about the rest of
Africa?"
The campaigning organisation
Global Witness wants UK firms to take more responsibility for the "oil curse"
that Equatorial Guinea suffers. Sarah Wykes, its specialist analyst, said:
"American oil companies have been accused of activities at best morally
questionable and, at worst, corrupt and illegal. Given the EG government's
history of corruption, and the controversial track record of other extractive
sector companies operating there, it is in the interests both of its citizens
and of BG, that the company break this pattern and disclose fully what it is
paying to the EG government for its gas."
BG said: "We are founding
signatories of the transparency initiative. But in this case we are not dealing
with the EG government. We are dealing with a private entity, in a commercially
confidential contract."
The HSBC bank, asked for
information about money it passed through Luxembourg, said: "We fully cooperated
with the Senate investigation."
The Guardian 02-06-05
Meantime the arch hypocrite
Blair wrings his hands in public about the plight of "Africa" (Ed.SoACT)
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