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As if stripping one of the world’s poorest continents of its diamonds, gold and natural habitat wasn’t enough, it now looks like Africa is going to be the newest hot spot for oil exploration.
According to an article published on CNN.com the problems don’t end there; take the fact that African governments are openly corrupt, willingly accept bribes and operate using fiat contracts and you’ve got yourself a pretty hairy situation.
A company called Hyperdynamics (the focal point of the CNN.com article) learned the ways of doing business with African governments the hard way when they had contract canceled by the Guinean government – after already spending over $20 million on the project. And the sole reason for the termination? It was simply because the Guinean government wanted to get a better deal.
Never mind the fact Hyperdynamics had a perfectly good contract with the country.
Thankfully the head of Hyperdynamics was able to broker a deal with the Guinean government which allowed the company to resume oil and natural gas exploration. However, it was a year long process and required a bunch of meetings, lawyers and certainly a lot of back room bargaining.
Don’t get me wrong, I’m neither say that all African governments or government officials are corrupt or that things like this don’t exist in the United States, but if I owned an oil company I would be terrified of doing business in Africa. I couldn’t imagine being able to spend millions or billions of dollars working on a project knowing in the back of my mind that the rug could be pulled out at any moment.
But sometimes I guess that’s just the cost of doing business.
