africa and energy || energy crisis brightens zaire's future

Energy Crisis Brightens Zaire's FutureAuthor(s): Kenneth L. AdelmanSource: Africa Today, Vol. 22, No. 4, Africa and Energy (Oct. - Dec., 1975), pp. 49-55Published by: Indiana University PressStable URL: http://www.jstor.org/stable/4185542 .

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Energy Crisis Brightens

Zaire's Future

Kenneth L. Adelman

One month after the 1973 Middle-East War and start of the en- suing energy crisis, President Mobutu Sese Seko asked Zairians, "Where would we be today if we had not finished the first stage of Inga?" Inga of course refers to the gigantic hydro-electrical power complex in Bas-Zaire (formerly Lower Congo.). Important as it is, Inga is only one element in Zaire's total energy picture. The recent discovery of off-shore oil reserves and the operation of a petroleum refinery in Moanda, together with Inga, give Zaire one of the brightest energy prospects in all of Africa.

Petroleum Supply and Distribution

Zaire is a relatively large energy consumer in Africa because of its huge size and developed mining industry. The country's total petroleum consumption has grown as its industrial output increases. In 1970, 761.217 billion liters of petroleum were consumed in Zaire; in 1971, 820.42 billion; in 1972, 879.725 billion; and 918 billion liters for 1973. Of these totals, a bit over 40% was used for deisel-type fuel; 15% for premium gasoline; 12% for regular gasoline; 12% for kerosene; 11% for jet fuel; 8% for fuel oil; and 2% for regular aviation fuel.

To meet these fuel needs, Zaire long relied upon the large oil companies, primarily Fina, with over half the business, and Shell, Mobil, and Texaco. All parties were pleased with the arrangement until 1974. Then, during the first stages of the oil crisis, the companies sought to raise their domestic prices to offset rising costs. The Zairian government, wary of aggravating the already high rate of inflation, refused to allow the increase and, about the same time, ordered the companies to standardize their prices for petroleum products throughout the country. This in effect made them absorb some of the high transportation costs in Zaire. The con panies became increasingly distressed as their profit margin dwindled, but they continued to meet the country's needs in all but jet fuel, which was in short supply on the world market. They still hoped for future government concessions and were reluctant to complain too loudly for fear of jeopardizing their long-range investment prospects. Many had been

Kenneth Lee Adelman has just returned from two and a half years in Kinshasa, Zaire. He has published numerous articles on art, religion, and politics in Zaire and an article on Angolan independence for Foreign Affairs (April, 1975). At present, he is working for the U.S. Government on economic development for Africa and Asia.

The data presented in this article was gathered in Kinshasa, Zaire, from government officials involved in the power and energy areas and from businessmen operating in Zaire. While many of the figures cited have not previously been published, the author has reason to believe they are more accurate than those to be found elsewhere.

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doing business in the country for over a half century and wanted to continue for another fifty years.

Thev were in for a surprise when, instead of making concessions, the government simply nationalized the entire industry. On December 19, 1973, the day President Mobutu returned from three Arab countries, the Minister of Energy announced that as of January 10th, 1974, a government corporation called PetroZaire would be the sole supplier and distributor of petroleum products throughout the country. He assured the oil companies that just compensation would be forthcoming, which somewhat eased the jolt.

There are a host of possible reasons for Zaire's nationalization of the petroleum industry. First and perhaps foremost, the industry was the largest foreign concern after the President's dramatic November 30, 1973 speech which effectively Zairianized the economy by ordering the take- over of all medium and small businesses and agricultural activities. The decision to create PetroZaire, announced just three weeks later, was merely a further step in the nationalization process already underway. Second, Zaire was obviously disturbed by the oil companies' continual requests for price increases and by their difficulty in supplying jet fuel, a precious commodity for President Mobutu who considers the Air Zaire fleet, especially the Jumbo Jets, his biggest prestige item.

In addition, Zairian officials may well have believed that the oil companies were making a fortune in the country, a profit they would like to have, and that they would get a better deal from doing business directly with the Arabs. This seems to have been a key factor. President Mobutu had been courting the Arabs before this time, breaking diplomatic relations with Israel shortly before the outset of the latest war despite years of friendly relations between the two countries and extensive military training programs in Israel for Zairian officers. The President further cultivated "our brothers, the Arabs" with a highly publicized trip to Algeria, Libya, and Egypt just before nationalization (November 1973) and to Saudi Arabia, Kuwait, and Iran just afterwards (December 1973 and January 1974). Despite the diplomatic offensive, the Zairian efforts have in the main proven futile since the Arabs have refused to give Zaire any special arrangements, whether in terms of long-term supply contracts or reduced prices. In fact, Zaire now pays $2 or $3 per barrel more to the Arabs than to the large oil companies for petroleum products.

Finally, there are the inevitable rumors that the government nationalized the oil industry for some more mysterious reason. One hears that the government was furious at Fina, a Belgian company, for allegedly diverting tankers from Zaire to Belgium during the crisis in Europe. Also, rumor has it that the Arabs were contemplating large investments in the copper industry of Zaire, foreign capital that the President would eagerly welcome. These and other stories persist even though there are no hard facts to substantiate them.

Regardless of the government's motives, the oil companies soon found themselves nationalized. Some minor exceptions were allowed, such as the oil refinern in which Zaire already owns 50%O with an Italian firm, Ente

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Nazionale Idrocarburi (ENI) owning the rest. Part of the distribution network in the East was left in private hands for another year. Still, for all intents and purposes, PetroZaire became the oil industry in Zaire, even though for months it existed only as a name, and not as an organization, while the oil companies continued to supply and transport petroleum throughout Zaire.

For over six months following the nationalization announcement, PetroZaire actually consisted of only two persons, the Director and his Deputy, who were busy preparing plans to consolidate the four major companies into one Zairian structure. In December 1973, there were approximately 150 expatriates working for the companies, most of whom continued to work as before until April or May 1974. At that time, Fina released much of its staff - now about 33, down from 85 - and Shell removed all of its expatriate employees. Out of the original 150 executives and managers, there are now some 40 or 45 expatriates working either for the oil companies under PetroZaire or for Petro-Zaire directly.

Hence the transition from a private to public petroleum industry in Zaire was a smooth one with the major companies cooperating. Of course they helped PetroZaire get established in part to assure receipt of compensation for all the equipment and facilities taken over in the country. While the government has fully agreed to just compensation - which the companies estimate at upwards of $160 million - little has actually been done. Zaire has not even begun negotiating amounts as the officials consider the matter still under "careful study." Even after one year, the oil companies remain optimistic about getting their money, though perhaps not as much as requested. They believe that Zaire must pay or ruin its international financial rating. It simply cannot keep encouraging large foreign investment after refusing to compensate a large industry which was nationalized.

The oil companies have helped PetroZaire not only to encourage full compensation but also to protect their future business arrangements in the country. All four of the major companies are involved in exploration activities in Zaire, efforts which have not been affected by nationalization. In addition, some continue to work on contract for PetroZaire. For example, Mobil Oil still operates the elaborate machinery for making lubricants, and supplies aviation fuel, some crude oil, and special products used for the paint and textile industries. Hence the companies have had their own reasons for helping PetroZaire through the transition period, which formally ended on January 1, 1975 when final consolidation of the industry in Zaire took place. The four accounting, sales, distribution, public relations, and administrative offices of the oil companies are new centralized and effecively integrated in Petrozaire.

The new, consolidated PetroZaire should not have any major supply problems during its first year of full operations. Present plans call for Zaire to receive half its crude oil from Libya and the other half from Iran or possibly Algeria and the major oil companies. In the past, Zaire imported

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669,193 tons of crude oil, valued at $12.7 million in 1970; 672,033 tons valued at $14 million in 1971; 717,018 tons valued at $16.2 million in 1972; and 179,095 tons valued at $4.1 million for the first three months of 1973.

While the Arabs have agreed to supply this crude oil, and some refined products as well, they do so at fairly high prices since Zaire is a relatively small consumer. Also the Arabs have refused to sign any long- term contracts with Zaire to guarantee continual supply over the years. It seems that they regard Zaire more as a burden than a brother. Because of such treatment, over which Zaire has not publicly protested as yet, the government found itself in the embarrassing position of doubling domestic petroleum prices on May 1, 1974, just a few months after the oil companies requested slight price increases. At present, domestic prices are extremely high, though they are uniform throughout the country. Premium gasoline sells for $1.55 per gallon, regular gasoline for $1.44 per gallon, kerosene for 76c and diesel-type fuel for 93c per gallon.

Many of these products are produced in Zaire at the refining plant outside Moanda on the Atlantic Ocean. SOZIR, as it is called, plans to increase its production from an annual output of 750,000 tons in 1972-73 to over 1.7 million tons of refined products per year. Actually the refinery was specifically designed to process the type of crude oil supplied by the large companies. Consequently, it works less efficiently refining the Libyan crude, which is of a slightly lower quality. There has been some thought given to changing the equipment or expanding the plant to better accomodate Libyan oil, but nothing has been done. No action is likely until Zaire's offshore oil is analyzed and production begins.

Zaire gets most of its imported refined oil from Algeria. The supply to eastern Zaire comes by ship to Lobito, Angola and along the Benguela Railroad into Zaire, and from Kenya and Tanzania. Zambia also supplies the Shaba (ex-Katanga) Region, sending mostly diesel fuel for the heavy mining equipment, motor oil, and jet fuel for the Lubumbashi airport.

PetroZaire's outlook for the immediate future appears fairly good. One main problem area is the supply of 15,000 tons of aviation fuel needed in the country. This product is in short supply throughout the world, in part because of increased use of the premium part of the barrel in the United States and Europe to meet the pollution standards in new en- vironmental laws. Also, PetroZaire may be concerned about assuring supply of half its crude oil requirement, the half coming from Iran and the oil companies in the past. While the contract for Libyan crude oil is in effect for 1975, the remainder needs to be negotiated.

Oil Exploration and Production

PetroZaire's outlook for the long range future appears excellent, due primarily to the production of off-shore oil. In 1969, Zaire gave concessions for exploratory drilling to a consortium composed as follows: 50% Gulf Oil Zaire (subsidiary of Gulf Oil); 32.28% Japan Petroleum Zaire (subsidiary of Teikoku Oil); and 17.72% Littoral Zairois (subsidiary of

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Cometra Oil). The group spent approximately $25 million on exploration and is now spending an additional $30 or $35 million to begin production, scheduled to start by the summer of 1976. The current plans are to begin producing 25,000 barrels per day, which is slightly more than total Zairian consumption, and to increase production upwards during the months following. There has been no public announcement on the total amount of oil located on the small 25 mile coastline nor the type of crude oil there, although it seems to be the low-sulfur type crude. In that case, Zaire ma possibly export its total production of this valuable type oil and continue to import its own fuel requirements. These decisions have not vet been made and all arrangements have to be worked out between Gulf, the Japanese firm and Zaire once production begins.

Whatever is decided, however, Zaire stands to gain, whether in the form of crude oil to meet domestic needs or great increase of foreign reserves to more than cover its own petroleum costs.

In addition to this off-shore find, Zaire is hopeful that oil can be found on-shore along the coastline. At present, a consortium of Fina (50%), Shell (25%)), and Mobil (25%) is conducting exploratory drilling. No results have been announced as yet. Even if there is only a small reserve found, it may still be exploited since the drilling equipment is in such close proximity. In the interior of Zaire, Texaco (50%) and Shell (50% ) have rights for exploratory drilling in the central basin, between Mbandaka and Kisangani, but no findings are reported as yet.

On top of this, Zaire is extremely interested-in the future of Cali1nda, the small territory lodged between the People's Republic of the Congo and Zaire, politically considered a part of Angola, and economically valuable with off-shore oil. The Angolan liberation movements have proclaimed that Cabinda is and must remain an integral part of Angola, even though the two territories share no common border. Others are eager for Cabinda to be totally independent. President Mobutu seems to be supporting both sides at once. He fully backs the F.N.L.A. movement which seeks to unite Cabinda and Angola while allowing the Cabinda liberation movement to raise arms and money in Kinshasa. Certainly the Zairian government is eager to share in Cabinda's treasures, which now add up.to more than 150,000 barrels per dav or over six times initial production off-shore Zaire.

Hvdro-Electric Power

Zaire's future supply of hydro-electrical energy looks as good if not even better than petroleum. Zaire's total consumption is high: 3,437,283 MWh in hydro power and 103,079 MWh in thermal power in 1971; and 3,436,920 MWh in hydro and 117,090 MVVh thermal in 1972. Over 70% of this consumption goes for the mineral and metallic industries located in the Shaba regioq. Zaire can easily meet the hugh demand because of the Inga Dam project.

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The idea of capturing the tremendous power of the Zaire (Congo) River - second in the world after the Amazon with a discharge of over eleven million gallons per second - was first conceived in 1885.The site for the dam, at Inga near the mouth of the river, was chosen because the water drops some 330 feet in less than nine miles. In 1929 a special committee gave serious study to the construction of the power station on the site. The plans moved ahead slowly and by 1960 a special proposal was handed to the World Bank for financing. Nothing became of this port- folio since the country was thrown into turmoil with civil wars and rebellions. In 1967, after President Mobutu had seized power and the country settled down, an Italian team again took up the plans and pushed the project.

The plans finally adopted call for a successive construction of the power plant. This is possible at Inga since the dam is being built not across the Zaire River but on dry land with the river to be diverted later to run through its generators. As a result, the project becomes financially and technically feasible since construction continues on one section after another section is already completed and supplying energy. Upon completion of the final stage, Inga IV or "Grand Inga," the price of the energy per unit will be the cheapest of any hydro-electrical plant in the world and far cheaper than nuclear power.

The first stage, Inga I, was dedicated on November 24, 1973. Its present output of 360,000 kilowatts is only a fraction of that expected from Grand Inga. The construction cost totalled $110 million, of which the government of Zaire paid two-thirds and obtained loans, mostly from the Italians, for the remainder. The cost (more than $280) per kilowatt, ran high, but the energy was needed for Kinshasa and the industrial development of Bas-Zaire with its cement factories and planned iron and steel factory at Maluka designed to produce 250,000 tons of steel.

Inga II is scheduled for completion sometime in 1976. Its output will be three times that of the first stage, 1.3 million kilowatts, at a total estimated cost of $150 million or under $150 per kilowatt. Construction of Inga II is being directed by Italinga, the same firm involved in building Inga I, and includes participation by American (General Electric, Westinghouse), French, Italian, British, and German firms.

Certainly the unique aspect of Inga II is that it will supply energy to the copper mines of the east. This is made possible by the 1700 kilometer long Inga-Shaba line, a high tension power line going through more than 400 kilometers of dense forest land. This line will be the longest in the world, surpassing the 1500 kilometer Cabora Bassa - Pretoria line, and its construction constitutes the largest single contract in history, $250 million. A consortium of American firms, including Morrison Knudsen, Inter- national Engineering Co., and Fischback and Moore International, landed the contract for building the line and two conversion stations, one at Inga and one in Kolwesi (250 kilometers northwest of Lubumbashi). Construction is well underway and the first steel tower was dedicated in December 1974. The final tower and conversion stations should be in place by September 1974. After the initial tests and adjustments, full 54



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working operations to provide Shaba with Inga's power are scheduled for January 1, 1977.

This task is a staggering engineering feat of the first magnitude. To install the 9,400 towers, some 3,350 persons will be employed, including 375 Americans and 325 Brazilians who have done construction work in the Amazon jungle. The plans call for the importation of 170,000 tons of materials including 150 trucks and a fleet of gigantic tractors to tear down trees. Where the tractors cannot clear a path, dynamite will be used. Besides the technical difficulties of working on a project 1700 kilometers long through near-possible terrain the team faces problems of importation, transportation, bureaucratic delays, and of course the usual mishaps of working in a developing country. For example, the initial survey team dropped small aluminum poles by helicopter along possible construction routes, only to find that when they flew back, all the carefully placed markers were gone. Apparently, they were hot items in the local markets, selling for a few cents apiece.

FolloAing the construction of Inga II and the Inga-Shaba line comes Inga III, presently in the planning stages. Its output could reach 1.8 million kilowatts with the cost per installed kilowatt around $210. At the completion of Inga IV and Grand Inga-still in the discussion stage- there is the potential for more than 30 million kilowatts with the final cost per kilowatt around $70. This would make Inga far and away the most powerful hydro-electrical plant in Africa, more than ten times the capacity of the Aswan Dam (2.1 million kilowatts) and five times that of Cabora Bassa, Mozambique (6.32 million kilowatts).

Naturally this tremendous energy potential has important political repercussions, both domestically and internationally, for Zaire. The Inga- Shaba power line binds the country together, perhaps irrevocably. The Shaba Region with all its copper production and the one region with a strong sense of solidarity and a history of secessionist sentiments, will be almost totally dependent on the Kinshasa area for its power. Apparently this factor was decisive in the construction of Inga and especially of the Inga-Shaba line. Government leaders well realized that the power for the copper industry could be supplied from Zambia and from local water sources, probably at considerably less cost than the Inga project.

Conclusion

Internationally, the country's exportation of both petroleum and hydro-electrical power will place Zaire as a key energy provider for central and much of southern Africa. There are already plans afoot to export energy to Zambia, Tanzania, Rwancla, Burundi, Mozambique, Rhodesia, and the small African republics to the north of Zaire. This places Zaire in a strong position, along with Nigeria, as a leacding political and economic force of Africa, and may prove invaluable in helping President Mobutu realize his dream of great continental power and world prestige.

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africa and energy || energy crisis brightens zaire's future

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