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The challenges for corporate oil Fractious energy developments

Empires of Oil Corporate Oil in Barbarian Worlds By Duncan Clarke £20 Profile ISBN: 978-1-84468-046-5

having taken issue with the ‘peak oil’ proponents in his last book The Battle for Barrels, Dr Duncan Clarke now turns his attention to the great game that is the world’s hydrocarbon industry. He is hardly an uninvolved observer of the industry – for 30 years he has worked in oil exploration, more recently as a world-renowned analyst and as the chairman and CEO of Global Pacific &Partners, a company he formed 20 years ago that acts in a private advisory capacity for many of the world’s top oil companies. Global Pacific & Partners also hosts numerous oil and gas conferences, exhibitions and briefings around the world. Clarke acknowledges the need for “ruthless objectivity” in tackling this analysis of an economic sector pivotal to a world whose dependence on oil and gas is all but total. This ruthless objectivity is allied to a broad experience of world affairs. He is well travelled, having visited more than 100 countries over four decades “[providing] multiple prisms through which to view the divergent societies and diverse views that makes up our contested world”. Following an upbringing in Zimbabwe (then Rhodesia) he spent much of the 1970s and 1980s in all regions of Africa and other parts of the developing world, including a stint with the UN as an economist working on and in Africa. “In the

process,” he writes, “my world became one of protracted civil war, several regime changes and subsequent political dramas that were akin to (and, for many, worse than) ethnic cleansing...” And it is perhaps these personal recollections than give us a clue to what motivates this book. No one would accuse him of wearing his heart on his sleeve, but Clarke likens the current situation confronting today’s oil industry to that faced by the Roman Empire before its fall. Even as oil breaks through the $100/barrel mark, multitudes of Barbarians are at the oil industry’s throat threatening to overthrow the old order. This analogy with the Roman Empire is a theme that emerges in an early chapter of the book and echoes through to the final page. For Clarke foresees a rapidly changing landscape. By 2030, he predicts, “a new set of local heirs to the global political order and its oil reserves will walk upon the world energy stage”. Clarke clearly wants the industry to face up to the risk of an implosion

of social and economic order that unanticipated change could pose. To navigate and understand this new landscape, and the opportunities it might offer, Clarke uses the notions of Niccolo Machiavelli and, “his thoroughgoing realism... the fruits of honest, harsh, forceful, uncomfortable, provoking and acutely perceptive thinking”.

The oil curse One of the first issues the author examines is the so-called ‘oil curse’. He demonstrates little patience with the popular theory that oil, corruption and conflict are somehow inexorably interlinked. This theory has been central to several recent books and Clarke focuses on three in particular; Andy Stern’s Who Won the Oil Wars? Gary Leeches’ Crude Interventions, and Poisoned Wells – The Dirty Politics of African Oil by Nicholas Shaxson (see Reviews African Business August/September 2007 issue). He insists: “In reality, oil is not a curse as such, although its mismanagement (typically in the hands of government) might, but need not, become one.” He then leaps to the defence of the oil industry saying: “Few [of the industry’s critics] take the trouble to acquaint themselves with the deep and complex histories that have shaped under-development in the third world. Nor do many accounts, if any, consider on a cost-benefit basis the enormous impacts of corporate oil portfolio investment, without which many states (notably Nigeria) might be considerably worse off.” That is an interesting line of reasoning and not without merit, although it does smack of the ‘better a half loaf than no loaf at all’

argument. Furthermore, many of the industry’s critics would want to contend that the enormous impacts that Clarke refers to are less relevant to ordinary Africans than they are to a ruling elite – and that is a status quo that the oil industry seems to be quite comfortable with. And it is peculiar that this book’s footnotes, with regard to Shaxson’s Poisoned Wells, state that “the bulk of this otherwise informative book [Poisoned Wells] is a critique of individuals within the political oil elites in selected countries, and the view taken on the oil curse in effect excuses oil companies and states from any casual connection to the oil curse” – a view which, it might be argued, largely echoes Clarke’s own! The author then adds: “While novel as an idea, it is not persuasive, while the notion that governments (including policies that they practise) have no liability or impact on their own backyard is bizarre.” Nonetheless, Clarke is on safer ground when, later in the book, he counters the argument that the oil corporations are just too wealthy and powerful for the governments and civil society of the developing world to be able to negotiate equitable contracts with. One oft cited statistic is that the large oil corporations each has a market capitalisation that is greater than the GDP of many states. That may be true, but, as Clarke argues, this is not comparing like with like. “Market capitalisation is a stock reflecting value,” he explains. “GDP is flow like income. Normal capital/output ratios of, say, 4:1 render these supposed comparisons wildly misleading to say the least ... moreover, it is seldom pointed

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African Business | February 2008