FACTBOX-Key political risks in the Gulf of Guinea

DAKAR, March 1 (Reuters) - A stretch of West Africa's coast spanning more than a dozen countries, the Gulf of Guinea is a growing source of oil, cocoa and metals to world markets.

But rising rates of piracy, drug smuggling, and political uncertainty because of several major elections this year in an area ravaged by civil wars and coups have made it a challenging destination for investors seeking to benefit from the massive resources.

The Gulf of Guinea runs from Guinea on Africa's northwestern tip to Gabon in the south and includes Nigeria, Ghana, Ivory Coast, Democratic Republic of Congo, and Cameroon.

Here are some of the risk factors.

PROTESTS INSPIRED BY THE UNREST IN NORTH AFRICA

It is still to be seen whether the wave of popular protest in North Africa will be copied in Sub-Saharan Africa, especially in the countries of the Gulf of Guinea where socio-economic conditions are similar to those in the north, and which is also home to some of the world's longest serving leaders.

So far, protests called by opposition groups in Cameroon and Gabon have either petered out due to lack of popular support or have been crushed by state security apparatus.

What to watch:

-- Any protest movement gathering momentum, or any further security crackdown.

NEW ENERGY FRONTIER?

Gulf of Guinea nations produce more than 3 million barrels of oil per day -- about 4 percent of the global total -- mostly for European and American markets, with the bulk coming from OPEC-member Nigeria (2.2 million bpd).

Smaller producers include Equatorial Guinea (300,000 bpd), Congo Republic (340,000 bpd), Gabon (230,000 bpd), Cameroon (66,000 bpd) and Ivory Coast (40,000 bpd).

While many of the region's producers are struggling to maintain output, oil companies believe the deep seas along the coast west of Nigeria could be a new frontier.

Ghana joined the ranks of West African oil producers in December and is expected to ramp up output to 150,000 bpd in the coming months. Further out, Sierra Leone and Liberia hope offshore drilling will spell oil riches for them as well.

Washington estimates the Gulf of Guinea will supply about a quarter of U.S. oil by 2015 and has sent military trainers to the region to help local navies secure shipping.

What to watch:

-- In a move that has raised eyebrows with some donors and investors, Gabon has decided to invite direct bids for investments in remaining oil blocks rather than auction them. The government has said that new legislation being prepared for the sector will govern negotiations. [ID:nLDE6A328S]

-- The results of exploration efforts by Tullow (TLW.L) and Anadarko (APC.N) off Ghana, Sierra Leone, and Liberia could go a long way to defining the energy potential of the region.

Anadarko said in November it made a second oil find in Sierra Leone at its Mercury-1 well. [ID:nSGE6AE0Q0] Tullow and Lukoil also have additional prospects in Ghana. [ID:nLDE6BE0KE]

-- The security of operations and shipping is a key risk, with piracy on the rise in the area.

-- The security of operating contracts may also cause concern after Ghana's government said last year Exxon Mobil's reported deal to buy Kosmos' stake in the Jubilee field was illegal. Kosmos reported in August the deal was scrapped.

COCOA HUB

Two-thirds of the world's cocoa comes from Gulf of Guinea nations, most of that from No.1 global producer Ivory Coast, and the rest from Ghana, Nigeria, Cameroon and others.

Cocoa output from the four producers during the 2009-10 season hit a three-year low below 2.4 million tonnes, but may rebound over 2.5 million tonnes over the next two years if Ghana sticks to its ambitious targets. [ID:nLDE6990D4]

A key risk, however, is a political crisis in top grower Ivory Coast that is severely delaying shipments from the ports of Abidjan and San Pedro and could boost smuggling.

What to watch:

-- Ivorian export ban. Ivory Coast's presidential claimant Alassane Ouattara has extended a ban on Ivorian cocoa exports to March 15 in an effort to starve incumbent Laurent Gbagbo of funds. [ID:nLDE71L1UE] Western and African leaders have said Ouattara won a Nov. election, but Gbagbo has refused to stand down.

So far, it appears many major exporters are heeding the ban by halting new export registrations -- a factor has slowed official shipments from Abidjan and San Pedro.

Analysts say, however, that much of the cocoa is likely to find its way onto the market through smuggling routes, including into neighbouring Ghana. The bulk of the 2010-11 season's crop has already been registered for export. [COC/IC]

-- Ghana's bumper harvest. No. 2 world cocoa grower Ghana is expecting official output to rebound this season to 800,000 tonnes, after below 650,000 tonnes last season. [ID:nLDE6BL19X]

The country has said it is committed to its target of 1 million tonnes of annual output within the next two years. If successful, the programme could put Ghana in the running to overtake Ivory Coast as the world's top cocoa producer.

-- Longer-term trend. Ivory Coast's political crisis has called into question the longer-term security of supply from the world's top producer. The government has said it is keen to revamp the sector that is suffering from years of neglect since a 2002-03 civil war, but years of turmoil have blocked reform efforts, leading to output declines.

IRON ORE AND OTHER MINERALS

Gulf of Guinea nations -- already home to top bauxite exporter Guinea and major gold producer Ghana -- have attracted billions of dollars of investments from resource firms eager to dig up its vast unexploited resources of iron ore.

The region could eventually produce nearly 10 percent of the world's iron ore, up from under 1 percent last year, according to the U.S. Geological Survey.

Investments announced last year from BHP Billiton (BLT.L) (BHP.AX), Rio Tinto (RIO.L)(RIO.AX), Vale (VALE.N)VALE.SA and Chinalco amount to around $10 billion.

Mining companies are well aware of the risks common to West Africa, contract security being one of the chief worries.

What to watch:

-- Iron-rich Guinea's successful elections in November ended two years of military rule and could be a green light for investors to re-engage. New President Alpha Conde has named a former adviser to the prime minister as mines minister and plans to rewrite the mining code to give the state a 33 percent stake in projects, from 15 percent currently. [ID:nLDE70N0NJ]

-- Other risks in the region include tight power generation capacity -- something which has interfered with mining investment in other countries such as South Africa and Chile.

Most notably, Cameroon is hoping to triple power generation by 2020 after shortages forced Rio Tinto's joint-venture Alucam smelter to cut back operations in 2009. Cameroon issued a treasury bond in December that it said was oversubscribed. Proceeds from the bond are meant to go towards hydropower projects. [ID:nLDE6BM0X7]

PIRATES AND DRUGS RUNNERS

Piracy in the Gulf of Guinea is not on the scale of that off Somalia, but analysts say an increase in scope and number of attacks in a region ill-equipped to counter the threat could affect shipping and investment. [ID:nLDE64I1D0]

Recent attacks by gunmen on ships off Cameroon's major port of Douala have showed pirates are extending their range beyond the restive Cameroon-Nigeria maritime frontier, where Niger Delta rebels operate.

Eleven local officials were kidnapped and later released in February, this follows the killing of five guards at a Perenco site off the coast of oil-rich region. [ID:nLDE71G2C0]

Cameroon blamed piracy for part of a 13 percent drop in oil output in 2009 to 73,000 bpd. Production has since fallen to 66,000 bpd and is expected to dip further to 55,000 bpd in 2011. Nigeria, meanwhile, suffered years of curtailed output due to rebel attacks.

West African drug trafficking is also having an impact on the region's economies. The United Nations estimates that $1 billion worth of cocaine, destined for Europe from Latin America, passed through West Africa in 2008.

What to watch:

-- Shipping, oil production, and investment trends will tell the tale of the economic impact of piracy. Cameroon is expected to hold an offshore lease sale in 2011 that might be a good gauge of the perceived risks of piracy to the sector.

-- Analysts say the drugs trade is leading to a spike in regional money laundering, crime and corruption that could set back some of the region's fragile gains. [ID:nLDE69B23S]