China Building $8B Oil Refinery in Nigeria

In the news…

China is going to build an 8 billion dollar oil refinery in Nigeria. It is the first of 3 refineries that comprise a $23bn agreement between NNPC and CSCEC. Nigeria’s state oil company, NNPC, will cover 20% of the cost while the state of Lagos will provide the land. The China State Construction Engineering Corporation, CSCEC, will cover the additional 80% of the cost. Nigeria already has 4 oil refineries but they are run very poorly and are estimated to be operating at only 40% capacity. Due to this inefficiency, Nigeria has to import some refined oil.

China’s dependence on energy (especially in the form of fossil fuels) is increasing dramatically and will continue in a strong upward trend. New power plants will be built, and more energy will be expended. One of the most obvious indicators of the trend for increased fuel demand is the automobile market.

In the past year, China’s car market expanded by almost 40%. Contrast that to the U.S. where new car sales plunged more than 20 percent in 2009 to a 27-year low of 10.43 million vehicles, less than the 12.23 million sold in China during January-November, making the Asian giant the world’s largest car market for the first time. Since the year 2002, about 50% of all motor vehicles in China have been purchased by individuals instead of large corporations or the government previously. As incomes increase, the high annual growth rate of private ownership is expected to accelerate. A new generation of young adults is emerging in China. This generation demands higher wages, better working conditions, and new material possessions.

However the Chinese government is taking steps to slow inflation, curb overspending, and control the economy. China’s economy expanded 11.9 percent in the first quarter. China International Capital Corp. has said that it expects growth to slow to 7.5 percent by the fourth quarter.

More cars mean more fossil fuels. Therefore along with this comes an increased demand for energy, particularly in the form of fossil fuels, which is still the cheapest form of energy available. Moreover it appears the Chinese government is taking steps to obtain that oil independently, even if that means teaming up with Nigeria.

Ed Lowell, contributing writer

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