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E. African Oil Potential Creates Much Hope, Many Fears - 2004-05-01

New evidence of possible oil reserves in East Africa, stretching from Madagascar to the tip of Somalia, has prompted several major oil exploration companies to begin drilling in the region. East African governments are eagerly cooperating with the companies, expecting to share in future oil revenues that could significantly boost their impoverished economies. But critics say there is also much potential for the oil money to add to corruption in the region, and make the countries even poorer.

Reviewing data recently taken from rock samples off the coast of Pemba Island in Tanzania, British geologist Chris Matchette-Downes says East Africa has the potential to become what he termed the world's hottest oil exploration frontier in the next few years.

"I took samples from the Pemba oil seep and extracted samples from a number of wells in Tanzania and one well in Kenya," he said. "There are indications that [there] is an active petroleum system somewhere that hasn't been found yet. That leads me to think there is a massive soft rock system that runs all the way along the coastal strip of East Africa, probably into Somalia and maybe all the way up to Yemen. We now need to find the traps and hope the oil hasn't leaked out or has been lost in another way. But I'm convinced we will find significant finds."

That enormous optimism is shared among more than half a dozen oil companies currently surveying and drilling along East Africa's coast.

At least three companies, including oil giant Royal Dutch Shell, are searching off the coast of Tanzania. Other companies from the United States, Britain, Australia, Malaysia, and Denmark are exploring offshore in Kenya, Madagascar and Mozambique.

The interest is new to a region that was long thought to have little potential for an oil boom. Previous explorations in the 1970s and '80s showed some oil and natural gas deposits but they were not considered to have any commercial value.

Further oil explorations were put on hold while international companies flocked to discoveries made in West African countries like Nigeria and Angola.

While West African fields are helping to meet U.S. and European demand, energy companies say they are hoping oil from East Africa will meet the ever-increasing demand from across the Indian Ocean in China, India, Japan and other parts of Asia.

In Kenya, the renewed search for oil has hopes soaring that the country could soon join the ranks of Africa's major oil producers and reap enormous financial rewards. Kenya relies mainly on tourism and commodities exports for revenue and has long been looking for new ways to emerge from decades of poverty.

A senior geologist at Kenya's National Oil Corporation, Eunice Kilonzo, says the government believes that if oil is found here, it could single-handedly transform the economy.

"For example, in Sudan, they are producing about 280,000 barrels of oil on a daily basis," said Eunice Kilonzo. "This translates to about $800,000 daily for Sudan. Imagine that being reflected in the Kenyan budget, imagine what impact it will have on our economy if we were to find oil."

But critics of oil exploration in Africa say Sudan, along with Nigeria and Angola, are also examples of how promised billions of dollars in oil revenue have failed to alleviate poverty and have only deepened government corruption and internal conflicts.

The Africa policy adviser for the U.S.-based Catholic Relief Services, Ian Gary, has been monitoring what effect oil is having on Africa's newest petro-state, Chad.

Late last year, a nearly $4 billion, 1,080-kilometer underground pipeline, built by a consortium of oil companies and backed by the World Bank, began carrying crude from Chad to the Atlantic coast.

The huge Western investment in Chad came with strict rules. The flow of the estimated $2 to $6 billion in oil revenues that Chad could earn over the next 30 years must be open to public scrutiny. And the government must use the wealth to improve the lives of its people people, most of whom earn less than $200 per year.

But Mr. Gary says the Chadian government, which has a history of being corrupt and repressive, has so far shown few signs it will change its ways.

"I think one of the lessons of the Chad experience is that you can put safeguards in place," he said. "But if these safeguards are put in place in a country with severe governance problems, severe human rights problems, then there are going to be problems along the way. What happens is that oil revenues go directly to the government in many cases in countries where power and resources are already very centralized. Even in countries that have some democratic tradition, oil production tends to erode opportunities for accountability. So, it's really a mixed blessing to have oil revenue coming in."

Experts say it is still too early to say just how much potential East Africa has for long-term oil production.

But hopes and concerns are already rising about how petro dollars will affect a region with millions of people desperate for a better life.