Border dispute hinders Niger’s China-built oil pipeline

Hello from London and welcome back to Energy Source.

Today my colleague Aanu Adeoye writes about a new 2,000km pipeline project between landlocked Niger and its southern coastal neighbour Benin.

Pipelines, along with other energy infrastructure, are a potentially huge area for growth, especially in sub-Saharan Africa, which has only 13,000km or so of operational pipelines for oil and gas products, compared with more than 100,000km in the US, according to a new report from the fuel retailer Puma Energy.

Currently, over 80 per cent of fuel in sub-Saharan Africa is moved by road tankers, raising the risk of accidents and traffic jams. But as Aanu reveals below, operating cross-border pipelines is far from straightforward.

Thanks for reading. — Malcolm

Border dispute delays Niger’s first oil exports

Niger is on the verge of becoming a regional oil major in a move that could have far-reaching geopolitical ramifications — if it can resolve a brewing border dispute with neighbouring Benin.

An ambitious 110,000 b/d pipeline spanning 2,000km from Niger to its southwestern neighbour Benin was completed in March by China National Petroleum Corporation after a months-long delay due to sanctions imposed by the Economic Community of West African States on Niger following a military coup last July. Oil was supposed to start flowing soon after — what would have been Niger’s first crude exports.

Niger produces 20,000 b/d from its Agadem Rift Basin in the country’s south-east, most of it from CNPC projects. The oil from there, which is refined locally, is consumed domestically since Niger lacks export routes.

Construction began on the pipeline in 2019 and costs ballooned beyond the budgeted $5bn. It is supposed to be a game-changer for Niger, turning it into a significant regional exporter, linking the Koulele oilfields at Agadem to the port of Seme in Benin. It is expected the pipeline will initially carry 90,000 b/d before increasing to 110,000 b/d.

Here’s where the border dispute becomes pivotal. Niger, a vast desert nation in the Sahel, the semi-arid strip south of the Sahara, is landlocked, bordered on all sides by countries in west, central and north Africa. It has no port access and often relies on Benin and Togo for imports and exports.

Being a landlocked nation has always been a significant challenge but not a particularly insurmountable problem, as long as Niger maintains friendly relations with its west African neighbours. As members of the Ecowas bloc, trade is supposed to be easier and less onerous between states. When construction began five years ago, Niger was a democracy, ruled by President Mahamadou Issoufou, who was then succeeded by Mohamed Bazoum in 2021.

But last year a junta called the National Council for the Safeguard of the Homeland took control of the state and General Omar Tchiani, previously head of the presidential guard, became president. In response, Ecowas announced severe sanctions that contributed to a humanitarian crisis in one of the world’s poorest countries. Crucially for the pipeline, it also prevented the importation of necessary equipment for the project as borders were shut. Those sanctions have since been relaxed, leading to the completion of the pipeline, but frosty diplomatic ties between Niger and Benin continue to stand in the way.

Niger has refused to open up its land borders with Benin despite its neighbour doing so after Ecowas sanctions were lifted, meaning goods from Benin cannot enter the country. This has put a massive strain on Beninese businesses active in cross-border trade with Niger. Niger has said it will not reopen its land border with Benin due to security concerns and accused its neighbour of violating trade agreements between the two countries and CNPC.

Benin’s President Patrice Talon said last week that oil exports from Niger would only happen if the country opened up its borders. “If you want to load your oil in our waters, you can’t view Benin as an enemy and at the same time expect your oil to cross our territory,” he said.

One expert estimates that Benin is losing $7mn in daily export fees that Niger would have paid.

Since the coup, the ruling junta has pivoted from traditional western allies to embracing alternative partners. Niger has kicked out troops from former colonial power France and ordered US forces to leave. In turn, Russia’s Africa Corps, the new name for the private military company formerly known as the Wagner Group, arrived in the capital Niamey.

China is also expanding its already close ties with Niger. It has advanced $400mn to help the country pay off mounting debt accumulated since the military takeover. The loan comes with a 7 per cent interest rate and Niger will repay China by sending the equivalent amount of oil over a 12-month period.

China, however, is likely to watch this dispute from the sidelines since it enjoys warm relations with both parties. 

“I doubt China would get too involved in this dispute because the interest of both parties, particularly Niger, would be to get this resolved,” said Rachel Ziemba, senior adviser at Horizon Engage, noting that what is expected to be a minor delay would not affect Beijing since it sees Niger as a potential long-term play.

Niger’s new rulers have repeatedly said they will prioritise economic sovereignty and building new alliances with non-western partners. The IMF predicts that oil production will turbocharge Niger’s economy to 11 per cent growth this year, the fastest rate for any sub-Saharan nation. If that is to happen, Niger will need to make nice with its neighbour so the oil starts flowing from their shiny new project. (Aanu Adeoye)

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Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.