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East Africa oil boom builds excitement; Oil and gas should not be a curse.

Discussion in 'Jukwaa la Siasa' started by nngu007, Mar 21, 2011.

  1. nngu007

    nngu007 JF-Expert Member

    Mar 21, 2011
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    NAIROBI // The north and west African states of Nigeria, Angola, Algeria and Libya have long enjoyed the benefits of being the continent's biggest oil producers. But in recent years, oil companies have turned their attention on east Africa, scouring the previously untapped region for more of the precious resource.

    Oil finds in Sudan and Uganda as well as natural gas deposits in Tanzania and Mozambique have oil companies excited about east Africa for the first time. As firms from around the world, including the Middle East and China, rush to prospect for oil in the region, experts have urged governments to astutely manage their newfound resources. Kenya is close to becoming the next oil-producing country. Thirteen companies have divided the country's north and east and are drilling exploratory wells, according to Kiraitu Murungi, Kenya's energy minister.
    "There is a lot of interest in oil exploration in our northern frontier region," Mr Murungi said last week at a conference on east African oil in Nairobi. "We Kenyans are praying for a commercial discovery within the coming months. We are very encouraged by the results we have seen." The China National Offshore Oil Corporation drilled a 5000-metre well in northern Kenya, the deepest well in the country, and has hit natural gas deposits. The company hopes that oil is also in the vicinity. Africa now provides China with 30 per cent of its oil needs.
    As the Chinese have scrambled to extract Africa's mineral wealth to fuel its booming industrial complex, they usually offer governments more than money in return for resources. In Kenya, China is building hundreds of kilometres of new roads. "It's a win-win situation for everyone," said Shi Jicheng, east Africa manager of BGP, a subsidiary of China National Petroleum Corporation. "They get roads here and we get some benefit back in China."

    Uganda, Kenya's neighbour to the west, found oil along Lake Albert in 2006. London-based Tullow Oil estimates that there are more than 2 billion barrels of oil in the Lake Albert basin. "Lake Albert is a proven petroleum province," said Fred Kabanda, the principal geologist in the Ugandan energy ministry. "It has opened the whole east African rift system to oil exploration." Since Uganda is landlocked, development of its oil resources will require construction of a 1,200-kilometre pipeline to the coast of Kenya. Such a massive project has not been undertaken in Africa since the oil pipeline between Chad and Cameroon was launched in 2000.
    Tanzania is using natural gas found off its coast to provide half of its energy needs and drive the growing east African economy. Industries from beer bottlers to cement factories are powered with Tanzanian gas. "This has been a huge benefit," said Peter Clutterbuck, deputy chairman of Orca Exploration, which is extracting gas in Tanzania. "Without the gas it would be a huge economic disaster for Tanzania."
    Companies are also prospecting for oil in Ethiopia, Democratic Republic of Congo, Eritrea and parts of Somalia. East Africa is the new west Africa in terms of oil exploration, according to industry leaders. "Why is everyone in east Africa? Because it's underdeveloped," said Rob Shepherd, finance director of Dominion Petroleum. "What we find exciting is that people are moving away from the traditional areas like Angola and Nigeria and they are chasing the geology in east Africa."
    But as east African countries come to terms with their newfound wealth, experts warn that the resource could be a curse if not managed properly. Nigeria, Africa's biggest oil producer, is dealing with an armed rebellion in its oil-rich Niger Delta. Other African oil states, such as Gabon and Equatorial Guinea, are plagued with corruption. Uganda and DR Congo have already clashed over the oil reserves in Lake Albert, which both countries share. The border region remains militarised and tense as the two countries try to delineate the border.
    "It is very important for the African continent that the energy industry is done properly," said Duncan Clarke, chief executive of Global Pacific & Partners, an oil consulting firm. "Is there an oil curse? I think it's a myth. The oil curse is a curse of politics, not one of oil. It's up to governments to correct those themselves." Kenya has already begun reviewing its energy regulatory regime in anticipation of potential oil finds. The review will involve putting in place oil and gas management policies aimed at ensuring equitable distribution of oil revenues while taking into account the interests of the communities in oil-producing regions.