LONDON — Some of the world's biggest oil companies have set their sights on Mauritania.
BG, Britain's third-largest energy company; Premier Oil, an independent; and Australian heavyweights Woodside Petroleum, Hardman Resources and ROC Oil see the small country in western Africa as a new frontier in a world where finding oil is becoming increasingly difficult.
With prices approaching $50 a barrel, a lack of spare capacity in the world and huge demand from the U.S. and China, the incentive to find new oil has never been greater. In the current climate, even a relatively small player such as Mauritania becomes important in helping oil companies reach their goal of replacing used reserves while cooling oil prices.
But just as in Nigeria, Angola and Equatorial Guinea, Africa's other oil-rich countries, Mauritania is not an easy place to do business.
Human rights activists worry that the country's precious resource could turn out to be as much of a mixed blessing as it has proved to be in other developing countries.
Until recently, interest in Mauritania, both political and commercial, had dried up because of the country's support for Iraq's 1991 invasion of Kuwait, its border disputes with Senegal and civil unrest in its oil industry. At the beginning of August, the country arrested a group of soldiers it accused of trying to depose President Maaouya Ould Sid Ahmed Taya, a French-trained army colonel who has been in power for two decades.
None of this has diminished the excitement that oil and gas finds in Mauritania have generated. Analysts at Deutsche Bank caution that "given the range of opportunities and potential for drilling to continue well into 2005, we believe that early success could have a disproportionately positive impact on the companies' share prices."
Hardman Resources this year proved that money could be made in Mauritania. In February the company sold part of its interests to BG for $132 million, just two months after paying $33 million for it.
Ted Ellyard, managing director of Hardman Resources, says that since making its acquisition in 2003, its acreage has grown in value thanks to significant oil finds. "We had very strong interest from a number of companies in different countries, including Japan and Europe," he said. "BG came in with the best price and there are tangible oil and gas reserves. There is probably a lot more value there than what BG paid."
Mauritania also has reserves of natural gas. Preliminary estimates indicate the country has 1 trillion to 3 trillion cubic feet in recoverable gas reserves, the equivalent of Australia's annual gas production. Those reserves would be enough to develop a liquefied natural gas project to supply the U.S. and Europe.
However, some analysts feel competition from Libya, Angola, Nigeria and Egypt would make it more likely that the focus would be on oil rather than gas unless more substantial gas reserves were found.
But Ellyard points out that Mauritania has at least one important advantage over its competition in the gas business. "The competitive advantage would be with gas because it has a shorter transport route than Nigeria and it could supply North American markets," he said.
Despite — or perhaps because of — the country's oil and gas, the future for Mauritanians is anything but clear. For a heavily indebted country whose per capita annual income is only $441, oil could be a substantial windfall. This is expected to increase its gross domestic product by more than 14% and generate $40 million for a country that collects $10 million in aid.
"Most Mauritanians in the street are convinced that oil will not make them rich but will force the country to modernize itself by upgrading infrastructure, develop new routes and supply water and electricity to the population," said Driss Amal, senior commercial officer of the British Consulate in Morocco. "They also hope oil revenues will bring changes to the country's banking system."
Arvind Ganesan, director of Human Rights Watch in the U.S., warns that oil revenue could be used to entrench and enrich the country's government at the expense of the population and efforts to democratize.
"In that respect, it would resemble the problems that occur in countries like Angola or Equatorial Guinea," he said. "Since holding political power also means controlling the wealth of the country, it could be a major obstacle to transparency, accountability and respect for human rights."