Right now, one of the busiest spots on the oil map of the world is Club Tropicana. Owned by a genial 45-year-old named Aguinaldo Salvaterra, the Tropicana is tucked behind the grand pink and blue Portuguese town houses that line the seafront of São Tomé. It's a little poky, but the beer is cold and, crucially in a town that rises late, enjoys a siesta and retires at dusk, Salvaterra rarely leaves his stool, which means the Tropicana is the one place in São Tomé that's nearly always open. Lately, that has made it the venue of choice for a new kind of customer. "British riggers, Scandinavian geologists, Japanese diplomats, you name it," says Salvaterra. "You just missed a big-time Nigerian oilman." He nods at the room and rubs his thumb against his forefingers. "Those tables are seeing some deals."
Seismic tests have suggested that São Tomé and Principe, two tropical rocks off the coast of West Africa with a population of 199,000, might be sitting on billions of barrels of oil. For the last few years, the islands have been buzzing with the hope that it will make millionaires of them all and transform a nation where the average annual income is $390. "This is a very poor country," says Luis Alberto Praxeres, executive director of São Tomé's National Petrol Agency. "Oil could solve all our problems."
It hasn't done so yet. In January this year, Chevron said it had not found enough oil to make a well economically viable at the first of its two drill sites off São Tomé. Exxon Mobil, too, has said that it will not, for now, be pursuing exploration off the island, though it retains its drilling rights there. Praxeres, however, still dreams his dreams, and his little country continues to attract a stream of oil-fevered visitors from overseas: this year alone, officials have arrived from the U.S., the U.K., Germany and Japan. But even if São Tomé and Principe were sitting on as much oil as Saudi Arabia, there would be no guarantee that the black gold would deliver happiness and prosperity to its people. On the contrary, if history is any guide, vast caches of oil can cause developing nations as many problems as they solve.
São Tomé and Principe is part of a string of countries on the Gulf of Guinea, the right angle in Africa's west coast, which is the oil industry's new El Dorado. By some estimates, Africa holds 10% of the world's reserves, but that figure belies the importance West Africa has already achieved as a source of energy. According to Poisoned Wells, a new book on African oil by Nicholas Shaxson, an associate fellow with international affairs institute Chatham House in London, the U.S. imported more oil from Africa than from the Middle East in 2005, and more from the Gulf of Guinea than from Saudi Arabia and Kuwait combined. Nigeria, the giant of the region, supplies 10-12% of U.S. oil imports. "There's a huge boom across the region," says Erik Watremez, a Gabon-based oil and gas specialist for Ernst & Young. "Exploration, drilling, rigs, pipes. It's exploding." Ann Pickard, Shell's regional executive vice president for Africa, agrees: "The Gulf of Guinea is an increasingly important place."
Indeed, says Daniel Yergin, chairman of Cambridge Energy Research Associates, West Africa is "only going to get hotter. It has the location and the resources; the technology is now there to develop them; and companies from all over the world want to be in on the action." Rising demand from India and China and worries over instability in the Middle East have fueled higher oil prices, and those in turn have precipitated a new scramble for energy — oil rigs worldwide now have to be rented a year in advance. There are several reasons why the Gulf of Guinea is a key focus of this rush. African oil is high quality, with a low sulfur content that requires little refining to get it to the pump. The Gulf is relatively close to the U.S., cutting shipping costs to the world's biggest oil consumer, and most of the reserves are out to sea — which means there's no need to construct pipelines through different nations to get the stuff to market. Equally important: unlike some other oil-rich countries, African nations welcome foreign companies to their oil fields, as there are no indigenous African oil majors. In his 2007 book Untapped: The Scramble for Africa's Oil, John Ghazvinian, a visiting fellow at the University of Pennsylvania, explains the euphoria like this: "African oil is cheaper, safer and more accessible, and there seems to be more of it every day ... No one really knows just how much oil might be there, since no one's ever really bothered to check."
Security is a crucial part of the attraction. West Africa may have a history of political instability, but most of its oil is offshore, and the assets of international companies have so far not been prone to the sort of nationalist expropriation common in oil's history from Mexico in the 1930s to Russia today. And although there have been attacks on oil installations in Nigeria, the region does not experience the sort of out-of-control violence that now plagues Iraq. Such factors make "West Africa of great interest and great significance," says a senior American diplomat in the region. In fact, five years ago the U.S. State Department declared West African oil a "strategic national interest."
The National Intelligence Council, a U.S.-government think tank, predicts that the Gulf of Guinea will supply 20-25% of total U.S. imports by 2020, but Americans are not alone in their mounting dependence upon West Africa. Angola is now China's top oil supplier. Gabon is a key supplier of France. Oilmen from countries as diverse as Russia, Japan and India are showing up in places like Equatorial Guinea, Cameroon, Chad — even perennial war zones like the Democratic Republic of Congo. With all that interest, Paul Lubeck, Michael Watts and Ronnie Lipshutz of the Center for International Policy, a U.S. think tank, calculate that the Gulf of Guinea will earn $1 trillion from oil by 2020 if the price stays above $50 a barrel. That's roughly double all the post-colonial aid to Africa since independence in the 1950s and 1960s.
That should be good news for some of the poorest countries in the world's poorest continent. After all, Norway and Britain used North Sea oil to underwrite their welfare states, while small oil powers like Oman and Brunei found themselves catapulted out of subsistence living in a generation. Likewise, Alberta's burgeoning petroleum industry has transformed the province into a major driver of the Canadian economy. But oil is not always a boon. What if it fuels corruption rather than development, and creates the same combustible mix of great wealth, relative poverty, grievance and instability as it has in the Middle East? Economists often talk of the "curse of oil," pointing out that countries with resources such as oil often grow more slowly, more corruptly, less equitably, more violently and with more authoritarian governments than others do. The authors ofEscaping the Resource Curse — Jeffrey Sachs, Joseph Stiglitz and Macartan Humphreys — assert that there is "a strong association between resource wealth and the likelihood of weak democratic development, corruption and civil war." Western oil workers in the Middle East lived in secure compounds with armed guards long before hijackers hit the Twin Towers. Is that same pattern developing in the Niger Delta today, where they also live in guarded compounds after the kidnap of more than 200 workers in the last two years?
To answer that question, consider the experience of three countries: Angola, Nigeria and Gabon. The oil industries in each are at markedly different stages. Angola's is in its first explosive flush of production, with gdp expected to grow 27% this year. Nigeria is in its prime, ranking as the world's 12th largest producer in 2006. Gabon's wells are slowly drying up. Together, these three nations trace an evolving arc of oil's effect on Africa and the world, of both its promise and its perils.
The world had known about Angola's oil reserves for decades, but war made them hard to reach. Now peace and high prices have made them alluring again. Today Angola is the second-largest oil producer in sub-Saharan Africa, and production is growing 25% a year. Since 2002, businessmen have been flying into Luanda offering huge sums in return for access to oil, while foreign governments have bolstered their case with aid. China has made a habit of outbidding the world here. In 2004, years of talks over structural reforms between Angola and the International Monetary Fund became redundant when a state-run Chinese bank offered a $2 billion line of credit without any such requirements for reform. In 2005 and 2006, the Chinese announced loans worth an additional $3 billion.
Angola is following a path that's painfully familiar among African oil states from Equatorial Guinea to Sudan. The pattern is this: well-connected businessmen and unscrupulous government officials grow impossibly rich, and the ruling élite uses its wealth and largesse to consolidate its own power. Much of this money is funneled into banks and assets abroad, while the majority of the population stagnates or even grows poorer.
In Angola, the government collected $10 billion in oil revenues in 2005 alone, and that number is expected to soar until production peaks in 2011. This is the first gusher of wealth in a country that has never known it. But the gains are not evenly spread. In downtown Luanda today, it's clear Angola's new rich are doing well. In April, the $35 million Belas Shopping Center — the country's first mall — opened in a new suburb called Nova Vida. There, in a store called Tapazio, they can shop for such baubles as silver-plated ashtrays and a $7,000 candelabra. Yet 70% of Angolans still live below the country's poverty line. Cholera and malaria are rife, and child mortality rates are among the worst in the world. A kilometer away from Nova Vida, in the shanty town of Cambamba, children play in open sewers, and piles of burning garbage shroud shacks in foul-smelling clouds of smoke. As Valdemir puts it: "The rich use mineral water. For us there is no water. No electricity or sanitation either."
What's next for Angola? As in other parts of Africa, oil will no doubt continue to dominate the economy. It currently accounts for around 90% of all exports, compared with 77% in Gabon and 95% in Nigeria. The second stage of the oil curse kicks in at this point. Investment in other industries gets crowded out, in part because it's hard for them to provide high enough returns to meet the costs of rising rents and salaries. Oil becomes virtually the only game in town, and the benefit to workers is surprisingly limited, with many of the more lucrative jobs — such as rig operator and refinery manager — going to foreign experts. Hence the expat enclaves in oil towns from Port Gentil to Baku. In some cases, unemployment can actually worsen. Fueled by the new spending power of the few, the cost of living also goes up. If the government doesn't share the wealth, the higher prices mean real poverty actually rises. And in Angola there's little evidence of government sharing: a 2004 Human Rights Watch report claimed that $4.22 billion in oil revenues went missing between 1997 and 2002.
Nigeria pumped its first barrel in the 1950s and has since set records for corruption. The government's own anticorruption watchdog, the Economic and Financial Crimes Commission, estimates that between independence in 1960 and 1999, the country's rulers stole $400 billion in oil revenues — equal to all the foreign aid to Africa during the same period. And while a small élite became rich, its members fought one another for the spoils. In 47 years, Nigeria has suffered a civil war that killed a million people, 30 years of military rule and six coups. Meanwhile, two-thirds of the country's 135 million people remain in poverty, a third are illiterate and 40% have no safe water supply. Then there is the environmental cost: more than 1.5 million tons of oil have been spilled over 50 years, and the Niger Delta is one of the most polluted places on earth.
Not surprisingly, disenchantment with the nation's political leaders runs deep. Nigeria has been a nominal democracy since 1999. But international monitors have questioned the fairness of the April 21 elections in which outgoing President Olusegun Obasanjo was replaced by his favored candidate Umaru Yar'Adua, a previously obscure state Governor. "These elections have not lived up to the hopes and expectations of the Nigerian people, and the process cannot be considered to have been credible," said Max van den Berg, chief E.U. observer, after the vote. When Yar'Adua was sworn in as President last Tuesday, he vowed to improve the election process and "intensify the war against corruption," while also pleading with "aggrieved" Nigerians to "suspend all violent activities and respect the law."
Containing the people's anger at Nigeria's rulers and their unwillingness to share the wealth isn't easy, though. The Delta is now home to several antigovernment, anti-oil-industry militia groups fighting for a cut of the revenues. The biggest and most organized is the Movement for the Emancipation of the Niger Delta (mend), which counts several hundred militants in its ranks. As Pullo, who titles himself General Officer Commanding, mend Camp Five, says: "God has given us everything in the Delta: water, fish, oil. And yet we are suffering. That is our cross." mend recently issued a press release vowing a new campaign of "attacks against creek- and land-based installations around the Delta. Car bombs will be freely utilized. We will share our pain with all Nigerians." Since the election, mend has kidnapped a score of foreign oil workers and launched several bomb attacks. In an interview with Time, Yar'Adua acknowledged the seriousness of the Delta's security worries. "Yes, the situation in that region is very troubling," he says. "It is obviously one of the issues that will define my presidency, and I would like to resolve it as soon as possible, once and for all."
The violence has reverberations far beyond Nigeria. Oil rose above $50 a barrel for the first time when in 2004 a Nigerian Muslim militant threatened to attack the industry, while fears that the April 2007 elections would trigger renewed violence were a factor in driving the price above $66 in late May. Yergin, of Cambridge Energy Reasearch Associates, warns: "As West Africa becomes increasingly important, consumers in the U.S., Europe and Asia will discover that their own energy security depends in part on political and economic stability in West Africa." American warships already patrol off West Africa, and U.S. energy and security experts have repeatedly called for a permanent military base in the region, possibly on São Tomé and Principe. The American diplomat is dismissive. "The notion that we're going to build a base on São Tomé, like Guantánamo or Diego Garcia, is unrealistic," he says, but he adds that the U.S. is talking to several countries around the region about a permanent U.S. naval presence. The formation of Africom, a separate African command that's currently based in Germany, is another sign of Washington's increased focus on security in West Africa. "The question," says the diplomat, "is how do you secure these shipping lanes, these oil platforms, in an area where the Africans themselves acknowledge they are virtually incapable of controlling their own coasts?"
At a hypermarket in downtown Libreville, a box of eggs from France costs $11, a small bunch of carrots $10, and a bottle of St. Emilion Château Ausone 1er Grand Cru Classé 1999 goes for $312. But it's a short drive from here to Mindwube I, the smoking mountains of garbage on the capital's eastern edge, where the hypermarkets throw out meat and vegetables that have passed their sell-by dates. Madeleine, a 60-year-old mother of 10, lives with several thousand others in the area around the dump. When the truck arrives, it's a ferocious feast. Hundreds of scavengers descend on the skip, elbowing their way into the trash and plunging their hands in deep. "The supermarkets are the best," says Madeleine. "It's in boxes, all arranged." Nor do the inhabitants of Mindwube just find food. There are "plates, dresses, jewelry, liqueurs, TVs, dvds, fridges, children's toys and mobile phones," says André Boussougou, 40. His specialty is aluminum, which he sorts and sells to a pot manufacturer, and leather, which he hawks to a dealer who exports to Europe. "It's really two worlds in Gabon," says Ernst & Young's Watremez. "Rich, poor. There's nothing in the middle."
Gabon is at the beginning of the end of its life as an oil producer. Without new finds, output is expected — optimistically — to halve in the next 20 years and stop in 30. And oil's legacy? A country that ranks 124th on the human-development index, but where Hummer and BMW dealerships thrive. Libreville itself has ranked among the Top 10 most expensive cities in the world for most of the past 20 years. But beyond these privileged circles, there is little evidence of a trickle-down effect. Opposition leader Pierre Mamboundou says his party, the Gabonese People's Union, figures that 15,000 people in Gabon hold 80% of the nation's wealth.
Even in a country that is four-fifths rain forest and has coastal waters full of fish, the government — which didn't respond to repeated interview requests — appears to lack a compelling vision of what industries might take over where oil leaves off. There is the additional economic burden of importing nearly all of the country's food from Europe. Entrepreneurial spirit has all but evaporated: while rich Gabonese may fund new businesses, most are set up and run by Europeans. And the nation is afflicted by a widespread sense of moral degeneration — from bureaucratic corruption to petty theft to sexual violence. "The lack of standards shown by Gabon's leadership has generated a complete immorality in the country," says a European economist in Gabon. "That's the real curse of oil."
Praxeres, executive director of the National Petroleum Agency, insists it won't happen. São Tomé has constructed a watertight system of oversight and transparency, he says, that will take petrol revenue out of government hands and put it under the control of an independent commission. The government has even set up an account at the Federal Reserve in the U.S. to hold all the cash that it expects to flood in. "We've learned the lessons of Africa," says Praxeres. "We have to use the money to invest in education, infrastructure and health — a future that is sustainable."
Praxeres and his compatriots will have to wait a while. Though Chevron and Exxon Mobil may have lost some of their earlier excitement over São Tomé, seismologists are convinced the oil is there — up to 11 billion barrels, according to Exxon Mobil's survey in 2000. But as yet, it's not clear how accessible those reserves might be. That gives São Tomé's people time to think and dream — but to do so with a caution that not all Africans have shown when the drillers come to town. In Club Tropicana, Salvaterra ponders his country's future. "I really hope we do have oil," he says. "But maybe just a little bit."
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