News / Africa

East Africa Oil Discoveries Breed Challenges

South Sudan security forces guard the Petrodar oil facility in Paloich in 2012. Neighboring Sudan sometimes blocks this landlocked country from oil export markets but a new Kenya pipeline may solve the problem.
South Sudan security forces guard the Petrodar oil facility in Paloich in 2012. Neighboring Sudan sometimes blocks this landlocked country from oil export markets but a new Kenya pipeline may solve the problem.
David Arnold
Significant oil reserves have been discovered in Uganda and Kenya in recent years. However before Kenyans and Ugandans can benefit from the discoveries infrastructure challenges, political issues and special interests must be overcome say experts.  
 
In the last two years the Irish exploration company, Tullow Oil, confirmed reserves of 1.7 billion barrels of crude oil buried near the shores of Lake Albert in Uganda. Across Uganda’s border to the north, the company next discovered an estimated 300 million barrels in Kenya and is now exploring in southern Ethiopia, tracing a Great Rift hydrocarbon basin that promises economic transformation for some of the world’s poorest countries.
 
Tullow’s success has attracted major producers from around the world, including France’s Total, China National Offshore Oil Corporation (NCOOC), Exxon and Chevron. More major oil interests are expected soon, including Brazil.
 
The industry is excited. “Now every potential hydrocarbon basin across East Africa is the subject of intense interest,” writes Bill Page in the annual Deloitte guide to oil and gas in East Africa.
 
“More hydrocarbons have been discovered in East Africa in the last two years than anywhere else in the world,” a senior oil company executive told Page. Natural gas has been also discovered offshore, but public attention in these countries has focused on the potentially faster returns from pulling East Africa’s oil out of the ground first.
 
For one of the poorest and least-developed regions of the world, Page said “the arrival of the international oil and gas industry offers hope for a better life for millions.”
 
The curse that threatens East Africa
 
Extracting oil in East Africa offers the potential for development, said Mwangi Kimenyi, director of the Brookings Institution’s Africa Growth Initiative (AGI), “but there is likelihood that this might not turn out to be so and may instead be a curse.”
 
“Unfortunately, the capacity to negotiate contracts is still mired in secrecy and underhanded dealings,” Kimenyi said. “My take is that contracting is still not open and there is still a great deal of ‘conspiracy’ between foreign firms and the local leaders.”
 
“On the one hand we have levels of cooperation that are pretty impressive,” said Ken Menkhaus, a Davidson College professor and East Africa scholar. For cooperation, he cited the three-nation peacekeeping effort in Somalia and the eight-country Intergovernmental Authority on Development.
 
“But just beneath the surface there are all sorts of rivalries that inhibit cooperation and in some cases dramatically,” Menkhaus added. “There is a fair amount of tension on a whole range of political and economic interests and the oil interest seems to be bringing some of these things to the fore.”
 
Menkhaus said oil can curse countries in two ways: distort an agricultural economy or encourage greed among local elite. He fears the latter in East Africa. “Instead of sharing resources and an accountable use of them, it’s going to fuel massive corruption in an already very corrupt region and produce armed conflict.”
 
Groups such as Brookings’ AGI, the Norwegian Agency for Development Cooperation and New York-based Revenue Watch Institute are educating governments, civil society and local media to the choices and the pitfalls.
 
Oil industry leaders also recognize how sudden oil riches can destabilize a country. Fareed Mohamedi, a vice president for industry analysis at Norway’s Statoil told industry leaders during an International Institute of Strategic Studies conference in London about the rivalries between 42 ethnic groups in Kenya, and described the union of Kalenjin and Kikuyu votes that led to electoral success for President Uhuru Kenyatta.
 
“Oil revenues will likely exacerbate perceptions that the Kikuyu have enjoyed favored access to political power and economic opportunities,” Mohamedi said. “It could also trigger inter-ethnic and regional violence.”
 
Delays plague Uganda oil projects
 
By some estimates, Uganda could receive $2 billion a year for 20 years from their oil discovery, but it hasn’t happened yet.
 
“Uganda’s oil is difficult to access and challenging to transport and process,” wrote Ben Shepherd of Chatham House earlier this year. He estimated the cost of developing the fields at $10 billion. In 2006, Uganda expected production would begin by 2009. “To date, production has yet to commence, delayed by disputes between the government and oil companies over production sharing, and taxation.”
 
For two years Uganda argued with Tullow and its larger partners, Total and NCOOC, about the size of a refinery. The companies proposed a facility refining 60,000 barrels a day, enough for local use. President Yoweri Museveni wanted a $6 billion plant handling 180,000 barrels a day to serve constituents and to increase the value of the exports. The government relented recently, but the debate may not be over yet.
 
“It’s their oil and they can refine everything at home if they like, even if the market is not there,” said Stan Drochon, the senior manager for East Africa oil and gas at IHS in Denver, Colorado. “But don’t expect a company like Total and CNOOC to be a willing partner in such a project” and refine all that oil domestically.
 
Port issues are unresolved
 
Museveni recently confirmed that his government had reached an agreement with Tullow, Total and CNOOC on a pipeline to the coast. Uganda now supports Kenya’s pipeline proposal, a $22.5 billion Lamu Port-South Sudan-Ethiopia Transport project that will have more support if South Sudan and Ethiopia sign on.  
 
If four governments can agree, they will benefit in the long term, said Statoil’s Mohamedi. “Working together to build integrated pipelines could release Ugandan oil and give economies of scale advantages to Kenyan infrastructure” includes ports and other facilities.
 
But for that to happen historical trends will have to be overcome. “Corruption in natural resource exploitation is really a joint venture between leaders, bureaucrats and the multinationals,” said Brookings’ Kimenyi. “I fear this is happening in some of the East African countries.”

You May Like

On Everest, Helicopters Rescue Stranded Climbers

Choppers transport some of more than 100 mountaineers trapped after deadly quake, avalanches More

Video Ten Years After Riots, France Searches for Answers to Neglected Suburbs

In 2005, a Paris suburb exploded into violence after two teenagers were electrocuted as they hid from police; since then, somethings have changed, others not More

US, Japan Announce Historic Revision of Defense Cooperation Guidelines

Nations say new guidelines will be 'cornerstone for peace and security' in Asia-Pacific region while also serving as 'platform for a more stable international security environment' More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
‘Angel of the Migrants’ Helps Desperate Syrians Arriving in Europei
X
Henry Ridgwell
April 26, 2015 10:36 PM
Waves of migrants are continuing to arrive on the shores of southern Italy from North Africa. After their dangerous journey across the Mediterranean, they face an unknown future in Europe. In the Sicilian city of Catania there is an activist dedicated to helping the refugees on their journey.
Video

Video ‘Angel of the Migrants’ Helps Desperate Syrians Arriving in Europe

Waves of migrants are continuing to arrive on the shores of southern Italy from North Africa. After their dangerous journey across the Mediterranean, they face an unknown future in Europe. In the Sicilian city of Catania there is an activist dedicated to helping the refugees on their journey.
Video

Video Ten Years After Riots, France Searches for Answers to Neglected Suburbs

January’s terrorist attacks and fears of more to come are casting a spotlight on France’s neglected suburbs. Home to many immigrants, and sometimes hubs of crime, they were rocked by rioting a decade ago. Lisa Bryant visited the Paris suburb of Clichy-sous-Bois, where the 2005 violence first broke out, and has this report about what has changed and what has not.
Video

Video Gay Marriage Goes Before US Supreme Court

This week, the U.S. Supreme Court will hear arguments on whether gay people have a constitutional right to marriage. VOA’s Michael Bowman reports, the case could lead to the nationwide legalization of same-sex marriage, or a continuation of the status quo in which individual states decide whether to recognize gay unions.
Video

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.

VOA Blogs