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Prepared by the
Institute for the Analysis of Global Security

July 16, 2003

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  • IN THIS ISSUE: FOCUS ON AFRICA
    Feature story

    West African Oil: Hope or Hype? by Dr. Cyril Widdershoven
    President Bush's trip to the African continent has focused attention on West Africa's large crude oil and gas reserves. Is West African oil a possible substitute for America's growing dependence on crude exports from the unstable Middle East or will the Gulf of Guinea echo the risks presented by the Persian Gulf?

    Other news

    Africa Drowns in a Pool of Oil
    IAGS LA Times Op Ed by Gal Luft: Bush can help Africa by leaning on international companies to stop paying off corrupt officials.

    Terrorist Threats in Africa
    Open borders between states, lawlessness and corruption, have made parts of Africa attractive havens for terrorists.

    On the technology front

    Federal Express starts using GM fuel cell vehicle for deliveries in Japan
    Federal Express and GM officially launched the first commercial test of a fuel cell vehicle in Japan.

    Boeing announces partners for Fuel Cell Airplane Project
    Boeing announced its partners for a demonstration airplane project aimed at exploring the use of fuel cell technology for future aerospace applications.

    Yamaha Motor to develop methanol fuel cell for small motorycles
    Yamaha Motor, Japan's second-largest motorcycle maker, is testing a fuel cell powered scooter that runs on methanol.

    Eastman CEO: Coal gasification solution for natural gas crisis
    J. Brian Ferguson, chairman and CEO of Eastman Chemical Company, told a United States Senate committee today that coal gasification is one of the long-term solutions to help the U.S. overcome a growing natural gas crisis.


    Useful Reference:

    Glossary

    Threats to Oil Transport

    Weekly Piracy Report

    TIME: Why U.S. Is Running Out of Gas

    Krauthammer: "Energy Fix: Pump the Oil, Raise the Tax "

    U.S. suspects Saudi-backed Wahhabis of role in Iraq attacks

    Islamic Traditionalists Sweep Liberals in Kuwaiti Election

    Blessing or curse? The paradox of oil

    Bottom of the Barrel: Africa's Oil Boom and the Poor

    Fueling poverty - Oil, war and corruption

    Caspian Oil Windfalls: Who Will Benefit?

    The Role of the Oil and Banking Industries in Angola’s conflict

    Freedom House

    DOE Office of Transportation Technologies

    Hybrid Vehicles:

    Toyota Prius - 48mpg
    Honda Civic - 48mpg
    Honda Insight - 56mpg
    Ford Escape
    GM
    DOE Hybrid Electric Vehicle Program
    Federal Tax Incentives
    State Tax Incentives

    How Does it Work? Take a peek:
    Internal Combustion vs Fuel Cells
    Look inside a Fuel Cell

    Fuel Cell Developers:

    Ballard Power Systems
    UTC Fuel Cells
    IdaTech
    MTI MicroFuel Cells
    Neah Power Systems
    Millennium Cell
    Delphi Corporation
    Energy Visions Inc.
    Polyfuel


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    Property of The Institute for the Analysis of Global Security © 2003. All rights reserved.

    Back Issues

    IAGS - TiE Event July 30: Fuel Cells: The Next Technology Revolution

    Feature story

    West African Oil: Hope or Hype?
    President Bush's trip to the African continent has turned public attention to the Dark Continent. Some analysts have trumpeted West Africa's large crude oil and gas as a possible substitute for America's growing dependence on crude exports from the unstable Middle East. Vice President Richard Cheney highlighted this view in his May 2001 National Energy Policy Report: "West Africa is expected to be one of the fastest-growing sources of oil and gas for the American market." He added, "African oil tends to be of high quality and low in sulfur, making it suitable for stringent refined product requirements, and giving it a growing market share for refining centers on the East Coast of the U.S."

    Despite the optimism, the possible impact of the West African oil and gas reserves should however not be overestimated. The West African oil province (the so-called Ecowas region or Gulf of Guinea) holds 33.8 bln barrels of proven oil reserves, 3.1% of the global total. Taking into account unproven reserves increases West Africa's share to around 7% of the world's total. In comparison to known oil reserves in the Middle East - 690 bln barrels - West Africa is at present nothing more than a minor player. Much of West Africa's oil reserves are offshore and thus more expensive to extract.

    While analysts look to the potential of West African oil to stabilize the international oil markets by adding a new layer of supply under the current volatile oil sector, giving traders and consumers more leeway to cope with crisis such as strikes in Venezuela or an Iraq war, current optimism is based on prerequisites of stability in the region, increased foreign investment, transparency and liberalization in the domestic petroleum sectors of West Africa and geo-strategic considerations.

    Revolutions, violence, ethnic unrest and corruption undermine the growth potential of the petroleum sector in this vast region. Domestic political strife brought several African countries to a standstill this past year. In March, international oil majors ChevronTexaco and Shell were forced to suspend production in the Niger Delta region following violent clashes and even outright kidnapping of international personnel. The 266,000 barrels per day (bpd) of lost oil represented approximately 13% of Nigeria's total average production of 2.1 million bpd. International oil markets felt the pressure.
    The ever-growing illicit small-arms trade has added fuel to the fire. Warlords have wreaked havoc in huge countries such as the Democratic Republic of Congo, Sierra Leone, Angola, parts of Nigeria and Liberia. Over the last months, international security services from the U.S, the EU and Asia, have turned their attention to al-Qaeda operatives in West African countries, such as Mauritania, Liberia, Sierra Leone and Burkina Faso. Illegal finance schemes involving diamonds, arms and terrorist networks have also surfaced.

    Bi- or even multilateral border disputes over control of potentially oil rich territories pose a threat to on- and offshore developments. Congo and Angola are in conflict over access to offshore oil; according to Congo the dispute is depriving it of as much as 200,000 bpd. Nigeria has multiple disputes with other states, of which the disputed Bakassi peninsula is the most pressing one.

    Since West African oil producing states are almost solely dependent on oil income, volatile international oil prices have profound impact on local economies, leading, as in the case of Nigeria, to potentially paralyzing national strikes.

    Oil related corruption is rampant in the region. According to Transparency International, Nigeria is the world's second most corrupt country, and corruption is growing in Gabon, Equatorial Guinea, Angola, Ghana, and various other West African countries, including oil newcomers such as Sao Tome, whose government was just toppled by a military coup. In an effort to combat this problem, a push for transparency and liberalization has increased pressure on international oil operators, such as Shell or BP, to open their books. The "Publish What You Pay" campaign, sponsored by George Soros' Open Society Institute and Global Witness, and supported by over 130 NGOs, has called on international extraction companies to "publish net taxes, fees, royalties, and other payments made so civil society can more accurately assess the amount of money misappropriated and lobby for full transparency in local government spending." Underlining the effort, British Prime Minister Blair announced the Extractive Industries Transparency Initiative, endorsed by a coalition of institutional investors, during the World Summit on Sustainable Development in Johannesburg this past September.

    Nigeria, by far the largest West African producer, provides a concrete example of the risks of relying on the region. Nigeria was the fifth largest crude exporter to the US in 2002, behind Saudi Arabia, Mexico, Canada and Venezuela. According to the DOE's Energy Information Administration (EIA,) Nigeria's exports to the U.S. declined from 842,000 bpd in 2001 (9.03% of total U.S. imports) to around 567,000 bpd in 2002 (6.27% of U.S. imported crude oil.) Increased reliance on Nigeria means increased exposure to unrest, disputes and instability in this volatile country. Since Nigeria is a member of OPEC its crude oil exports are also limited by the oil cartel's policy restrictions, which already constrain further expansion of production.

    Production sharing agreements in Africa have left international oil companies with a smaller percentage of revenue than popularly believed and thus little tolerance for the additional heavy risk premiums brought on by instability. West Africa's volatility limits its appeal to investors and impacts the likelihood of oil industry expansion. It remains to be seen whether the rush to Africa will improve America's energy security or replay in another arena the problems the U.S. currently faces in the Middle East.

    Dr. Cyril Widdershoven is the editor of Global Energy Security Analysis (GESA) and IAGS associate fellow.
    Top

    Other news

    Africa Drowns in a Pool of Oil
    IAGS LA Times Op Ed by Gal Luft: Bush can help Africa by leaning on international companies to stop paying off corrupt officials.

    Terrorist Threats in Africa
    Toward the end of his five-nation tour of Africa, President George W. Bush warned in Nigeria that he would not allow extremists to use the continent as a base for attacks. He also repeated a call for Liberian President Charles Taylor, known for harboring al-Qaeda operatives, to resign and leave the country.

    These two statements show how central Africa's position is to the U.S. war on terrorism. Open borders between states, lawlessness and corruption, have made parts of Africa attractive havens for terrorists. It is where they go to relax, refit and refinance. The impoverished, and often radicalized, societies in the region offer willing volunteers, training places, weapon supplies and a variety of poorly protected western targets. Among the results were the 1998 bombings of the U.S. embassies in Kenya and Tanzania in which 291 people were killed and 5,000 wounded; last November, 16 people were killed when a hotel was blown up in Mombasa, Kenya, while at the very same time terrorists fired missiles at an Israeli airliner carrying over 200 passengers. All of these attacks were executed by al-Qaeda.

    Osama bin Laden is known to have sent emissaries to various African countries in an effort to unite Islamic groups under the umbrella of al-Qaeda. One such emissary, Emad Abdelwahid Ahmed Alwan, aka Abu Mohamed, one of bin Laden's key lieutenants, was targeted last year by Algerian authorities. The Yemeni terrorist traveled in June 2001 from Afghanistan to Chad and from there to Niger, Mauritania, Mali and Nigeria, finally reaching Algeria in early 2002. Another al-Qaeda agent still on the loose is Fazul Abdullah Mohammed, suspected to be behind the 2002 Mombasa attacks. British and U.S. intelligence sources believe he is still in Kenya and could be plotting an attack on a western target in the region.

    According to U.S. and British intelligence sources "clear terrorist threat'' exists in Somalia, Tanzania, Uganda, Ethiopia, Eritrea and Djibouti. One additional country facing a significant rise of radical Islam and terrorist threat is Nigeria, home to Africa’s largest Muslim population and a major oil producer. U.S. ambassador to Nigeria Howard Jeter said recently that Nigeria faces real threat of al-Qaeda attack because of its close ties with Washington. And indeed, in February, al Jazeera television aired a message allegedly from bin Laden listing Nigeria as one of six countries which needed to be "liberated" from America's "enslavement."

    Africa’s diamonds provide a large part of al-Qaeda's funding. There are many links between al-Qaeda and the illicit trade in so-called "conflict diamonds" or "blood diamonds" bought from rebel groups in Africa, primarily in Sierra Leone. The London based organization Global Witness working to expose the link between natural resource exploitation and human rights abuses has estimated that al-Qaeda laundered $20m through diamonds purchases. According to David Crane, the head of Sierra Leone's U.N.-backed war crimes court, al-Qaeda's dealing in "conflict diamonds" took place under the protection of Liberian President Charles Taylor. This evidence against Taylor is one of the reasons President Bush insisted on his removal. Bush said Taylor must step down and that the U.S is "not going to take 'no' for an answer."

    To reduce the threat of terrorism from Africa, the U.S government launched several programs designed to assist countries like Mali, Niger, Chad, Kenya and Mauritania in combating terrorism by helping them protect their borders, track movement of persons and illicit materials and control financial transactions. The Bush administration announced a new $100 million anti-terrorism initiative designed to enable allies to improve their counter-terrorist efforts. The war on terror has brought about a growth in U.S. military footprint in Africa, particularly in East Africa where military bases and access to ports and airfields are of increasing strategic importance. Washington is reportedly considering requests by the U.N. that it head up a peacekeeping force in Liberia. But the growing presence of U.S. forces in Africa is a double-edged sword. On the one hand it allows African countries to improve their counter-terror capabilities and restore order in places of turmoil. On the other hand, increased presence of U.S. forces in the region could make Americans more vulnerable to attacks. This is especially true in countries where radical Muslim groups operate or enjoy support of the local government.

    More info:
    State Department: Patterns of Global Terrorism 2002--Africa Overview
    Global Witness: How al Qaeda moved into the diamond trade
    Top


    On the technology front

    Federal Express starts using GM fuel cell vehicle for deliveries in Japan
    FedEx and GM officially launched the first commercial test of a fuel cell vehicle in Japan. The firms are collaborating on a one-year test program in which FedEx will operate GM's HydroGen3 fuel cell vehicle, based on the Zafira MPV, on its regular delivery routes in the metropolitan area of Tokyo. The HydroGen3 has a range of 250 miles and a top speed of 100 miles per hour. It is GM's first entry in the recently announced Japan Hydrogen and Fuel Cell Demonstration Project, directed by Japan's Ministry of Economy, Trade and Industry (METI). Japan is particularly concerned with enhancing its energy security by transitioning to next-generation fuels: over half of the energy Japan consumes comes from oil, and since Japan has no reserves it is completely dependent on imports, almost 90% of which come from the Middle East.

    GM will collect data from FedEx on a daily basis, to determine how its fuel cell vehicles operate under the demanding commercial driving conditions faced in Tokyo, and will provide all vehicle engineering and maintenance.
    "To really prove that fuel cell vehicles are equal to or better than conventional, internal combustion vehicles, you need to operate them under tough, every-day conditions," said Raymond Grigg, Chairman and CEO, Representative Director, General Motors Japan Ltd. "Our fuel cell technology has advanced to the point where it's important to involve a real heavy-duty commercial user in our research and development activities. We expect to learn a lot by having FedEx Express put our HydroGen3 to the test on their daily delivery runs on the streets of Tokyo. This is how you truly prove durability and dependability."

    Larry Burns, GM vice president of research and development, and planning, said "This is another key step toward true commercialization -- when we can sell large numbers of fuel cell vehicles to consumers at prices they can afford and that also make sound financial sense for GM," adding, "It's really important to get fuel cell vehicles on the road in competitive business environments like the ones FedEx works in on the streets of Tokyo. They run a very successful global operation that demands reliability and durability."

    GM recently announced a partnership with Shell Oil to provide hydrogen refueling for a fleet of GM HydroGen3s in Washington, D.C. And in May, GM and Dow Chemical Company signed the world's largest-ever fuel cell power deal.
    More info:
    Japan: Agency for Natural Resources and Energy
    FedEx seeks ways to curb dependency on gasoline
    Top

    Boeing announces partners for Fuel Cell Demonstrator Airplane Project
    Boeing announced its partners for a demonstration airplane project aimed at exploring the use of fuel cell technology for future aerospace applications. The project will evaluate the potential application of fuel cell technology for future commercial airplane products. As part of the evaluation, the project will develop and flight-demonstrate an electric-motor-driven airplane powered by fuel cells.
    The project is led by the Boeing Research and Technology Center in Madrid, Spain, Diamond Aircraft of Austria will supply the demonstrator airplane, based on a certified Katana Xtreme motor-glider (in Europe called the Super Dimona); Intelligent Energy of the United Kingdom will provide the Proton Exchange Membrane fuel cell hardware and technical support; Spanish firm Sener will design and build a fuel cell controller unit to be used in research activities; Aerlyper, also of Spain, will integrate the electric motor into the airplane and perform airframe modification work; and U.S. firm Advanced Technology Products (ATP) will supply the motor, batteries, and controllers to complete the electric propulsion system, and perform the flight testing of the airplane.

    Work to integrate the fuel cells into the demonstrator airframe is expected to begin at the end of summer 2003, enabling a possible flight test in late 2004 or early 2005.

    In addition to being inherently cleaner and quieter than current technology gas turbines, fuel cells can generate approximately twice as much electricity from the same amount of fuel. Unlike a battery, which needs to be recharged, fuel cells keep working as long as the fuel lasts. Fuel cells and electric motors could potentially replace gas turbine auxiliary power units, which provide electricity and air for airplane systems.

    Also see: Coal fuel for jets
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    Yamaha Motor tests methanol fuel cell powered small motorcycles
    Yamaha Motor, Japan's second-largest motorcycle maker, is testing a fuel cell powered scooter that runs on methanol, a hydrogen rich liquid fuel with physical characteristics similar to gasoline. The scooter's fuel cell produces 500 watts of power, about equivalent to that of a 50cc motor. Yamaha's test scooters have reached speeds of 25 miles per hour. The prototype can travel about 125 miles on a 1.3 gallon methanol tank. Yamaha intends to cut the weight of the vehicle from its current 44 lbs with a full methanol tank to 22lbs. Yamaha is also considering boosting acceleration by coupling the fuel cell with a lithium ion battery in a hybrid fuel system.

    Also see: DOE: Clean Coal-to-Methanol project a success.
    Top

    Eastman CEO: Coal gasification solution for natural gas crisis
    In testimony before the U.S. Senate's Energy and Natural Resources Committee, J. Brian Ferguson, chairman and CEO of Eastman Chemical Company, said that coal gasification is one of the long-term solutions to help the U.S. overcome a growing natural gas crisis. The committee met to hear testimony on the impact of soaring natural gas prices and possible solutions. Ferguson noted, "Short-to-medium term solutions include reducing natural gas demand and increasing natural gas production. Long-term, however, federal environmental, energy and economic policies must achieve better alignment." He added, "It is economically unsustainable to continue policies that drive natural gas demand while simultaneously limiting access to natural gas supplies without providing a balancing energy alternative. One of the long-term alternatives to help alleviate this natural gas crisis is tapping into America's vast coal reserves - through the use of competitive coal gasification technology - to reduce natural gas demand."

    The U.S. has a quarter of world coal reserves, but less than 3% of global natural gas reserves. The U.S. accounts for a quarter of global natural gas consumption. Coal gasification uses a chemical process to turn coal into synthesis gas (syngas) that can be used like natural gas. While European chemical manufacturers derive most of their raw materials from globally traded oil feedstocks; U.S. manufacturers are tied primarily to natural gas. Thus, Ferguson said "the current situation threatens the entire U.S. chemical industry as we try to compete with this now disadvantageous feedstock."

    "Even though Eastman believes that coal gasification is ready for further commercialization right now, some additional market incentives such as the Clean Coal Power Initiative and the proposed clean coal tax credits are useful and necessary inducements," Ferguson said.

    Also see: Greenspan warns on implications of natural gas shortage
    Top