What is happening on the western front?

For more than half a century, East Africa was a dormant place where nothing significant was happening as far as hydrocarbon discoveries of oil and gas were concerned.
Now, since the beginning of this year, news reports have more or less painted the area as the new frontier of hydrocarbon activities.
The latest in the series is the second announcement by the UK’s Tullow oil of an encouraging oil discovery in Kenya’s Turkana region.
The first was announced two months earlier with both President Moai Kibaki and Prime Minister Raila Odinga describing the new development as a breakthrough in a long journey to promote Kenya’s status as an oil exporter.
In fact, Tullow launched its activities in the region six years ago.
More significant gas and some oil discoveries have been announced in Tanzania, Mozambique, Madagascar and even in Somalia — where Punt land is said to be on its way to start production.
Some junior independent companies, with small stakes, have also been involved in exploration activities. New discoveries help raise their share values.
Their market prices increase when their equities are put for sale.
The London-based Cove Energy was a case to illustrate the point.
It has an 8.5 percent stake in a consortium that made a gas discovery of a field in Mozambique, estimated to contain 15 trillion cubic feet.
In January, it announced its intention to sell that share.
The first bidder was no other than Royal Dutch Shell, who offered $ 1.6 billion. Four days later Thailand’s PTT upped its bid slightly, offering $ 1.7 billion. Rumors were rife that India’s ONGC was also considering a $ 2 billion proposal.
However, it was Shell that won in the end having matched its Thai rival and more important winning the approval of the Mozambique government for the takeover, which will fit well with its other interests in the region.
This seems like a new scramble for Africa with a number of world oil and gas companies taking the lead.
The list include names of ExxonMobil, ENI, Statoil, the American Anadarko and its counterpart the Canadian Africa’s oil, who all were active somehow with plans in that region.
This activity was highlighted by the dramatic visit by Britain’s foreign secretary William Hague early February to Somalia, the country that has almost disappeared from world radar screens since its collapse as a state in 1991.
The growing problem of piracy could pose a serious threat to the expected new hydrocarbon boom in the region.
The region is seen as a new virgin deposit to tap and more important as many analysts suggest, may provide a long waited opportunity to develop an alternative to the conventional supply region — the Middle East.
At one point, American planners were hoping to get 25 percent of their imported oil from Africa.
More important supplies going out of Africa can bypass the chokepoint of the Strait of Hormuz and the continued tension because of Iran.
However, in reality still there is a long way for East Africa to present itself as an alternative reliable supply to the Middle East.
For instance, Songo Songo gas field in Tanzania was discovered in 1974 by Italy’s Agip, but it took some three decades to start actual commercial production in 2004.
Two main problems hinder quick utilization of new discoveries — their quantities and remoteness of these areas.
That was aggravated by the lack of suitable infrastructure.
Domestic oil politics are expected to face up to one of the problems that need to be addressed before a real breakthrough is achieved.
Almost all countries in the region are importing their oil and gas requirements and their main concern will be whether to use the newly discovered wealth to satisfy that or go for export.
One of early statements attributed to Kenyan officials is how the discovery will or will not meet its needs for 100,000 bpd that is costing it more than $ 4 billion year.
The discovery in Kenya by the same company that discovered oil Uganda, Tullow, is raising doubts over the commercial viability of a plan to set up a refinery in Uganda, now that Kenya with a bigger market and consumption needs is emerging as a possible supplier and competitor.
Foreign companies are looking after their interests. They try to achieve, higher, better returns on their investments.
Technology has made new discoveries in East Africa a possibility, but turning that possibility into a reality and even a potential competitor to the Middle East is so far a long shot at best.
Gulf producers, led by Saudi Arabia, have developed their leadership only through their success in guaranteeing or meeting the needs of world markets at any time, at market prices.
— Alsir Sidahmed ([email protected]) is media consultant, trainer and freelance journalist.