East Africa Moves Centre Stage

East Africa Moves Centre Stage

These are exciting times for the African oil and gas industry. Sustained high oil prices have encouraged investors to explore acreage in most parts of the continent, resulting in the emergence of Uganda and Ghana as significant new oil powers. Eastern Africa is set to emerge as the world’s most exciting new gas exporting region, while hopes are still high of oil discoveries in the Indian Ocean. The big questions now revolve around not only the scale of the new finds but how they will be managed by governments unused to dealing with international oil companies. In this Special Report, we look at the possibility of Eastern Africa emerging as a global gas giant, the encouraging signs that Kenya may join the African oil club, the implications of the long-awaited Petroleum Industries Bill in Nigeria, the markedly different approaches taken by new oil producers Ghana and Uganda and an interview with an important industry player.

The biggest energy development overall is probably the discovery of huge reserves of natural gas in Mozambique and Tanzania. Mozambique could develop a liquefied natural gas (LNG) sector on the same scale as Nigeria, which would involve capital investment of tens of billions of dollars.

Apart from all the excitement over upstream investment and LNG production, it would also be worth considering more localised use of the gas. LNG revenues are all very well but domestic power and gas supplies could have a far bigger economic impact for the long term development of the country.

The discoveries to date have been made from relatively few wells, so there could be a lot more oil and gas still to be uncovered. Hopes have never been higher of commercial oil production in Kenya. Wells are being drilled in both onshore and offshore areas, as Nairobi dreams of joining the ranks of African oil producers.

North Africa is in something of a transition phase. The resumption of foreign involvement in Libya will take several years to pay off in terms of increased oil and gas production, and much will depend on the level of stability in the country, plus the introduction of an improved investment environment. The structure of the previous government meant that it was notorious for the level of red tape and impenetrable bureaucracy for foreign investors. Egypt too faces all the challenges of regime change but may also have to cope with becoming a net gas importer as domestic demand continues to grow.

One sector that receives relatively little attention in Africa is unconventional gas. The South African government has finally lifted its moratorium on shale gas development and with the world’s fifth-biggest reserves, shale gas could revolutionise the South African energy sector in the same way as it has in the US.

It could provide a lower carbon alternative to coal in the power sector and also feedstock for the country’s growing synthetic fuel industry, which is currently moving more of its production from coal to gas. Industrial consumers too would benefit from an alternative to coal and it would be no surprise to see the growth of a Southern African gas pipeline network over the coming decade. Aside from its natural gas, it is possible that Mozambique too may possess large reserves of coal bed methane (CBM) gas in Tete Province in the northwest. Tete is the world’s biggest emerging coal frontier and is only just coming into production following investment by Rio Tinto, Australia’s Riversdale and Vale of Brazil.

Little attention has thus far been paid to the region’s unconventional gas reserves but support for exploration is set to be included in the government’s national gas plan. Once Botswana’s CBM is developed, the region could follow the US in sourcing much of its energy requirements from this long ignored resource.

The future of Nigeria is obviously central to West Africa’s hydrocarbon ambitions. As discussed later, the long-awaited Petroleum Industry Bill (PIB) has the potential to revolutionise the country’s oil industry and make the entire production chain more transparent and accountable. Tackling oil industry corruption and crime in Nigeria will also have important ramifications beyond the country, as oil industry piracy has now affected Benin and Togo, increasing the cost of doing business in the region. With Ghana already producing oil and exploration efforts increasing offshore Sierra Leone, Liberia and Côte d’Ivoire, such criminal activity needs to be tackled on a regional basis.

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Written by African Business Magazine

African Business and its award-winning team is widely respected for its editorial excellence. We provide the all important tools enabling you to maintain a critical edge in a continent that is changing the world. Our special reports profile a wide range of sectors and industries including Energy, Oil and Gas, Aviation, Agriculture to name but a few.

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