DAKAR, Sept 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, drugs smuggling, and lingering
political uncertainty 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.

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 barrels per day).

Smaller producers include Equatorial Guinea (300,000 bpd),
Congo Republic (310,000 bpd), Gabon (250,000 bpd), Cameroon
(66,000 bpd) and Ivory Coast (60,000 bpd).

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

Ghana is already set to join the ranks of West African oil
producers later this year when its Jubilee field comes on line,
and Sierra Leone and Liberia are hopeful offshore drilling
results 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:

-- The results of exploration efforts by Tullow and Anadarko
off Ghana, Sierra Leone, Liberia and Mauritania north of the
Gulf of Guinea could go a long way to defining the energy
potential of the region.

Tullow announced in August its latest drilling result in
Ghana, Owo-1, found another major oil field that it hopes to
develop while a well in June, the Mahogany-5, found oil that
signified an extension of Jubilee.

Five other wells in Ghana, Sierra Leone, Liberia and
Mauritania are expected to be completed by year-end.

-- 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.

The move in one of the region's most stable countries adds
to broader worries in the coup-prone region that leadership
changes can trigger contract reviews.

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 is on track to hit a three-year low below 2.4 million
tonnes due largely to continued declines in Ivory Coast, but may
rebound over 2.5 million tonnes over the next two years if Ghana
sticks to its ambitious targets.

The outlook could pave the way for a global supply surplus
next year, after fears of shortages helped drive world cocoa
futures to 30-year highs in December 2009.

The bulk of this year's decline in West Africa will come
from Ivory Coast, where plantations are suffering from
underinvestment since a 2002-03 civil war.

Ivory Coast's representative to the International Cocoa
Organisation said output during the current season would decline
to 1.2 million tonnes from 1.223 million in the previous year.

As of end-July, some 1.124 million tonnes of cocoa had been
moved from Ivorian farms to the coast for export, according to
official figures. Analysts believe this volume is swollen by
smuggling from Ghana.

The season ends at the end of September.

What to watch:

-- Ivory Coast's government is keen to revamp the sector but
a lingering political crisis has slowed reform efforts. Some
progress could be made if Ivory coast sticks to a planned Oct.
31 election date.

-- Official output from No. 2 world cocoa grower Ghana is
also expected to slip this year, to below 700,000 tonnes from
710,000 tonnes, though the drop will largely be due to smuggling
keeping tonnage of the books rather than a drop in output.

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 and
could help push regional production above 2.5 million tonnes for
the first time since the 2007-08 season.

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.

"Guinea, Sierra Leone, Liberia, Cameroon, Gabon, Ivory
Coast, they all have potential," said John Jorgenson, iron ore
specialist at the United States Geological Survey (USGS).

The region could eventually produce nearly 10 percent of the
world's iron ore, up from under 1 percent last year, he said.

Investments announced this year alone from BHP Billiton
, Rio Tinto, Vale and Chinalco amount to around $10 billion.

What to watch:

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

-- Iron-rich Guinea holds unique risks in that it is in an
election year which if successful will take it from military to
civilian rule. The vote, whose decisive second round is due
Sept. 19, will be a green light for investors to re-engage with
the country.

Months before the elections began, Rio Tinto and Vale
surprised many by saying they would spend billions there, moves
widely interpreted as expressions of confidence in Guinea's
ability to complete the transition and uphold the contracts.

-- Other risks 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.

-- Attempts by mineral-rich countries to eke out a bigger
share of revenues could also complicate investment. Sierra Leone
and Ghana have both moved to raise mining royalties since late
last year, anticipating the flood of investor interest.

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.

An attack by gunmen on two ships anchored off Cameroon's
major port of Douala in May showed pirates are extending their
range beyond the restive Cameroon-Nigeria maritime frontier,
where Niger Delta rebels operate.

Cameroon blamed piracy for part of a 13 percent slide in oil
production 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
before rebounding.

Nigeria, meanwhile, has 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 to Europe from Latin America,
passed through West Africa in 2008.

What to watch:

-- Narcotics trade. Analysts say the drugs trade is leading
to a spike in regional money laundering, crime and corruption.

Experts have warned that West Africans are also consuming
more of the drugs flowing through their countries, raising the
spectre of rising crime and health problems.

Instability in Guinea-Bissau and Guinea over the last year
has also been linked, in parts, to the trade.
(Editing by Alison Williams)
(richard.valdmanis@thomsonreuters.com; Dakar newsroom +221 33
864 5076))