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

Uganda Court Annuls Anti-Gay Law

Court says law was passed in parliament without enough members present for a full quorum More

Multimedia Thailand Makes Efforts to Improve Conditions for Migrant Laborers

In Thailand, its not uncommon for parents to bring their children to work; one company, in-collaboration with other organizations, address safety concerns More

In Indonesia, Jihad Video Raises Concern

Video calls on Indonesians to join Islamic State of Iraq and the Levant, ISIL 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.
In Thailand, Some Efforts to Improve Conditions For Migrant Laborersi
X
Steve Herman
August 01, 2014 6:22 PM
Thailand has been facing increasing international scrutiny as a hub of human trafficking and slave labor. Some of the kingdom’s companies are striving to improve working conditions, especially for the millions of migrant laborers from surrounding countries. VOA Correspondent Steve Herman in Bangkok takes a look at one initiative for children at construction sites
Video

Video In Thailand, Some Efforts to Improve Conditions For Migrant Laborers

Thailand has been facing increasing international scrutiny as a hub of human trafficking and slave labor. Some of the kingdom’s companies are striving to improve working conditions, especially for the millions of migrant laborers from surrounding countries. VOA Correspondent Steve Herman in Bangkok takes a look at one initiative for children at construction sites
Video

Video Public Raises its Voice on Power Plant Pollution

In the United States, proposed rules to cut pollution from the nation’s 600 coal-fired power plants are generating a heated debate. The U.S. Environmental Protection Agency, charged with writing and implementing the plan, has already received 300,000 written comments. As VOA’s Rosanne Skirble reports, another 1,600 people are lining up this week at EPA headquarters and at satellite offices around the country to give their testimony in person.
Video

Video Information War Rages Alongside Real One in Ukraine

The downing of the Malaysian airliner two weeks ago, and allegations that Russians are shelling Ukrainian troops across the border, have moved the information war swirling around the Ukrainian conflict to a new level. VOA's Al Pessin reports from Kyiv.
Video

Video When Fighting Eases, Gazans Line Up at Bakeries

When there is a lull in the conflict in Gaza, residents who have been hunkered down in their apartments rush out to stock up on food and other necessities. Probably the most important destination is the local bakery. VOA’s Scott Bobb reports from Gaza City.
Video

Video China Investigates Powerful Former Security Chief

The public in China is welcoming the Communist Party's decision to investigate one of the country's once most powerful politicians, former domestic security chief Zhou Yongkang. Analysts say the move by President Xi Jinping is not only an effort to win more support for the party, but an essential step to furthering much needed economic reforms and removing those who would stand in the way of change. VOA's Bill Ide has more from Beijing.
Video

Video US-Funded Program Offers Honduran Children Alternative to Illegal Immigration

President Obama and Central American leaders recently agreed to come up with a plan to address poverty and crime in the region that is fueling the surge of young migrants trying to illegally enter the United States. VOA’s Brian Padden looks at one such program in Honduras - funded in part by the United States - which gives street kids not only food and safety but a chance for a better life without, crossing the border.
Video

Video 'Fab Lab' Igniting Revolution in Kenya

The University of Nairobi’s Science and Technology Park is banking on 3-D prototyping to spark a manufacturing revolution in the country. Lenny Ruvaga has more for from Nairobi's so-called “FabLab” for VOA.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.

AppleAndroid