Wednesday, 28 March 2012

Eastern Africa coast: An emerging fossil fuels giant

An oil rig. These monsters discover oil from the earth's bowels
THE ENTIRE EASTERN Africa coast is emerging as a fossil fuels giant. A flurry of finds of commercially viable deposits of oil and natural gas has spawned intense activity in exploration of these resources.

In the last decade or so, commercially viable oil deposits were found in South Sudan and Uganda. Natural gas has been found in Tanzania  while in Kenya an oil find announced this week, is awaiting commercial verification. There are reports of viable oil deposits in lawless Somalia.

Since it takes about three years or so to verify commercial viability, the implication here is by 2016/17, this region of an estimated population of 200 million people will be a major player in the world’s energy market. An exploration mapping high potential areas in Kenya, indicates that eastern Africa could rival some middle east oil producers.

The frequent discoveries raise confidence on the potential of the region’s fossil oil’s exploration. This is expected to attract more investments into exploration in eastern Africa. So far an estimated US$8 billion has been sunk in oil exploration since 2006. However, this figure is expected to rise as more explorers seek licenses to explore for oil and gas deposits.

 Tanzania  for example, will hold an oil exploration licensing round for 16 offshore blocks starting in September this year, reported Reuters. Some firms spend an estimated US$2 million a day in oil exploration in east Africa, say sources in the energy sector.   Tullow oil Plc, which discovered oil in Uganda, Kenya and Ghana is said to have sunk an estimated US$800 million in Uganda.

 It is not clear how much has sunk in Kenya where it has struck oil at the first well. The find, what they describe as 20 metres of net oil, was struck at 1,041 metres way below the expected depth of 2,700 metres. The company says it will still drill up to 2,700 metres.

Apart from spending on exploration, more investment is expected in construction of infrastructure, Including Refineries, Oil Pipeline, railroads, roads and other related infrastructure. See  .  In Uganda, reported the East African, the consortium led by Tullow oil Plc will sink another US$10 billion to build such infrastructure. Tanzania will invest some US$1.1 billion to build a gas transportation pipeline from Songo  Songo wells to Dar-Es-salaam, the capital city.

 South Sudan will invest a total of US$4.2 billion to construct a 2400KM pipeline from South Sudanese Oil wells to the Port of Lamu in Kenya. Kenya on the other hand will invest US$8.1 billion to construct  a standard gauge Railway line from the Port of Lamu to Juba in South Sudan. . Although South Sudan was to bear the cost of the pipeline alone, now with  the new developments, it looks  likely that the MOU signed  just about  month ago, will be reviewed as Kenya must now bear some of the cost of the pipeline. Turkana county, where oil in Kenya was discovered is on the border with South Sudan and thus also on the pipeline.s path.
It is not clear how much of the precious commodities are available in the region given that new discoveries are made frequently-almost on an annual basis.  Therefore even their production capacity is not clear. Only South Sudan has a definite capacity of 350,000 barrel of crude per day (bpd).  

Uganda is still grappling with this issue and has settled on an initial output of 20,000bpd at the end of this year to be raised to 60,000bpd in 2016 and 180,000bpd later. The production conglomerate, led by Tullow PLc and which includes the French firm Total and Chinese company, CNOOC is gunning for 200,000bpd. Kenya is quite green on this score.

In Tanzania where natural gas (LNG) predominate, the confirmed  quantity changes almost every quarter and now stands at more than 10 trillion cubic feet or about 1.6 billion barrels of oil  equivalent. In 2009, she produced an estimate 560.7 million cubic meters of LNG.

These discoveries have spawned excitement among the population in this region. Optimists say that economic development and poverty alleviation will pick up speed come 2020. They have reason for optimism: the region has posted persistent and significant economic growth (average 5.6 per cent) between 2001 and 2010. The growth projectile has yet to ease despite the fact the drivers of growth are agriculture, tourism and basic manufacturing.

Compared to the oil producers in the Middle East, the region has a high probability of diversifying its economy due to natural advantages. Therefore fossil fuel finds are expected to fuel further growth through increased employment and consumption. The optimists therefore say that by 2040, the region will have emerged as a developed region.

Kenya, the most ambitious of the 11 nation region, plans to be an economic tiger by 2030. She has already laid the foundations for such take off and an oil find would quicken the pace of development and ensure the vision 2030 is achieved.

 Even without, an oil find, Kenya had identified the Pillars of future growth to include ICT and Tourism. For this reason she is promoting an ICT city at Konza near Nairobi. See . She is also planning to build   four resort cities to enhance and diversify  tourism products. The resort cities will be build  in Isiolo in Central Kenya, another  on the shores of Lake Turkana and another two at the coast.  With the find of oil in Turkana county, the development of Turkana Resort city, which was expected to take a little longer , is now expected to be prioritised.

There  are  pessimists who fear that the discovery of oil in the region could destabilise the region and open it to civil-strive. In short they fear that the discovery of oil will be a curse rather than a blessing.  Enough said.

1 comment:

  1. This is great news. However, east Africans ought to guard against exploitation by the big players and at the same time use the petro dollars to improve agriculture and industrial production.

    This will mean creation of real wealth and a leap towards a developed economy and a mature and stable democracy for the region