Cablegate: Re: For Release: Chinese Engagement in Niger and Potential
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R 121400Z FEB 10 ZFF6
FM AMEMBASSY NIAMEY
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UNCLAS SECTION 01 OF 02 NIAMEY 000120
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STATE FOR AF/W
STATE FOR AF/RSA- MAZEL, GRIESMER, BOWLES
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TAGS: PREL EAID EMIN EPET CH NG ENRG EIND EINV
SUBJECT: RE: FOR RELEASE: Chinese engagement in Niger and Potential
Areas for Cooperation
REF: EMAIL:RE: FOR RELEASE: CHINESE ENGAGEMENT IN NIGER AND POTENTIAL
AREAS FOR COOPERATION
1. (SBU) China is building a major portfolio in Niger's resource
sectors and will probably replace France as Niger's top foreign
investor when projects under construction are fully operational.
Chinese investments include oil and gas production, refining,
uranium mining, and infrastructure. There are no current examples
of U.S.-China collaboration in Niger. On the Nigerien side, the
bilateral relationship is managed directly from President Tandja's
office, and there is a striking lack of transparency in the terms
of investment agreements, most of which have been negotiated
without direct involvement of professional staff from the Ministry
of Mines and Energy. There is little scope for U.S.-China
collaboration when the comparative advantage of the Chinese is
their willingness to ignore international standards of transparency
and commercial viability.
2. (U)China National Petroleum Corporation (CNPC) has a US$5
billion deal to develop the oil and gas resources of Niger's Agadem
block. That concession was negotiated directly with the Government
of Niger (GON) after the government rejected a competing offer by
the Mobil-Petronas consortium that had done much of the initial
exploration. China sealed the deal by agreeing to construct a
20,000 barrel per day petroleum refinery, which was considered a
"must have" by President Tandja. (Comment: Economic analysts
question the economic viability of the refinery, which will produce
far more than Niger's current consumption, because high production
and transportation costs will make it uncompetitive to export.) In
2009, China paid a "signing bonus" originally announced as US$300
million, which helped to boost Niger's 2009 revenue by 26% over the
previous year.
3. (U) Although the terms of the production sharing agreement are
not public, much of the oil production is expected to be exported
by pipeline, with additional potential for export of gas when/if
the proposed Trans-Sahara gas pipeline is built from Nigeria to
Algeria through Niger. The block includes three different fields,
Goumeri, Sokor and Agadi, which have total recoverable reserves
estimated at 295 million barrels. The Chinese also have
exploration rights to two additional blocks, Bilma and Tenere, in
the same remote desert region. No detailed information is
available about the progress of construction at the Agadem site,
but a high volume of container traffic moves along the highway
across southern Niger and CNPC has established large staging areas
near Diffa, the eastern-most regional capital located near
President Tandja's home town.
4. (U) The Nigerien company established to own and operate the
refinery, Societe de Raffinage de Zinder (SORAZ) is 60% owned by
CNPC and 40% by the GON, but CNPC is covering all project costs
until the refinery is commissioned in 2011. Estimated production
of 20,000 barrels per day is far in excess of Niger's current
consumption of under 3,000 bpd and the refinery is nearly 1,000 km
distant from Niger's capital, Niamey. Dagang Surface Construction
Company has been awarded the contract to construct the 462 km
pipeline to deliver oil from the production area to the refinery.
5. (U) China is also the second largest investor in Niger's
uranium mining sector. China's state-owned uranium firm, SINO-U,
is investing US$ 300 million to develop a new mine at Azelik, which
is due to begin production in late 2010. The Nigerien company
formed to build and own the mine, Societe des Mines d'Azelik
(SOMINA) is a joint venture established in 2007 by SINO-U (37.2%),
the GON (33%), Beijing ZXJOY Invest of China (24.8%), with
Trendfield Holdings awarded a 5% stake as promoter of the deal.
This 5% holding was subsequently purchased in April 2009 by Korea
Resources Corporation (KORES). As part of the agreement,
Trendfield will assist KORES with the long-term off-take purchase
agreement of 400 tons of uranium annually from the Government of
Niger.
6. (U)Niger law gives the GON a 10% carried interest in every
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mining project, but allows the GON to invest in order to retain
greater percentage of ownership. In 2009, the China Import-Export
Bank loaned Niger US$ 95 million to cover Niger's share of the
capital costs of the SOMINA mine, which will produce an estimated
700 tons per year.
7. (U)Chinese-funded new infrastructure in Niamey includes a new
four- lane bridge across the Niger river that is nearing
completion, a large new Embassy compound with housing for all
staff, and a separate new Economic and Trade Center. Each of the
new Chinese-Nigerien joint ventures is represented by a modern new
office building in the capital. Construction by Chinese crews
using materials imported from China has limited the benefit to the
local economy.
8. (U)The oldest Chinese investment in Niger is the textile firm
Enitex, which was purchased by private Chinese investors when it
was privatized around ten years ago. The company subsequently
closed the fabric weaving operation, but has continued printing on
cotton fabric imported from China. Enitex products are popular in
both domestic and regional markets, but high costs and rigid labor
practices constrain profitability.
9. (U)For over fifteen years, China has sent medical doctors for
one-year rotations at the National Hospital in Niamey and several
regional hospitals. A recent initiative to place young Chinese
volunteers in Niger has not been as successful; the first group
arrived about three months ago, but most are still waiting for an
appropriate placement, and the Economic and Trade Office is likely
to terminate the program.
10. (SBU)On February 11, 2010, Conoff met with the First Secretary
at China's newly constructed Economic and Trade Office, an imposing
structure on a large compound in central Niamey. He reported that
the office is staffed by five Chinese expats, who also live on the
compound, and four local staff. Instead of inviting us to see the
new facilities, he received us in a small anteroom attached to the
guard house. He speaks fluent French and responded cordially to
questions, but did not volunteer any information, even that which
is publically available. According to him, the partners are only
now discussing how the production will be exported.
11. (SBU)President Tandja has been personally involved in building
Niger's bilateral relationship with China, his son has managed the
investment relationships in his capacity as the commercial
counselor in Niger's Embassy in Beijing, and members of the
President's family are reputed to benefit financially from the
investments. The personal nature of the relationships, the lack of
transparency in the terms of investment, and the high probability
of corruption make U.S. collaboration in the investment sector
highly unlikely.
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