News / Africa

Analysts: Kenya Shutdown Tempers East African Oil Ambitions

FILE - Fishermen row their boats next to an oil exploration site in Bulisa district, approximately 244 kilometers northwest of Kampala in this undated handout photo from Tullow Oil Uganda, July 2012.
FILE - Fishermen row their boats next to an oil exploration site in Bulisa district, approximately 244 kilometers northwest of Kampala in this undated handout photo from Tullow Oil Uganda, July 2012.
Reuters
Tullow Oil's suspension of drilling in Kenya after weekend protests shows that popular impatience for a share of the spoils is compounding the problems energy firms face building an oil and gas industry from scratch in east Africa.

Backed by local politicians, demonstrators from Kenya's poor, northern Turkana community marched on Tullow sites demanding jobs and other benefits, prompting one of Sub-Saharan Africa's most experienced oil explorers to “temporarily” halt work.

That is a blow to Kenya's government, determined to show it has security under control following last month's attack by Islamist militants on the Westgate shopping mall in Nairobi, in which at least 67 people were killed.

Investors' confidence was another casualty.

While east Africa is a hot new province for oil and gas exploration, excitement has been tempered by wrangles with governments, gaps in regulations and rickety infrastructure.

Local populations are understandably anxious for a windfall, but production may be years away, and such direct action is only likely to slow the region's emergence as a significant producer.

“There are numerous potential risks on exploration projects in poor, remote areas,” said Tom Savory, who works at consultancy Africa Practice. “Navigating local politics can be just as much of a challenge as navigating national politics.”

London-listed Tullow, which has a track record of delivering projects elsewhere in Africa, said it was working with the Kenyan government, local authorities and communities in the area to resume work as soon as possible.

Grievances in the local community erupted into protests around at least two of its drilling sites, demanding more jobs and contracts.

Tullow says more than 800 of its 1,400 employees in its Kenya operations are from the Turkana region.

“We welcome them [Tullow] to Turkana. But we want to start benefiting as early as possible,” said James Lomenen, a regional member of parliament who joined the protest at Twiga South-1 site. He said he saw workers evacuated from the site.

Reassurances

“No one was telling them to go; the community was just coming to have dialogue,” said Lomenen, adding that the protest was peaceful and demonstrators “were just outside singing”.

An industry source, however, described a “very tense” scene, and a senior Kenyan energy ministry official, Martin Heya, said politicians, whom he did not name, had stirred things up.

“We want them [Tullow] to work as soon as possible,” said Heya. “We shall work with security agents to make sure they feel secure,” he added, after police said they beefed up security.

Such incidents are not unique to Kenya.

In Tanzania, where gas deposits have attracted firms like Britain's BG Group and Norway's Statoil, residents of the Mtwara region protested in May over construction of a pipeline there, demanding more benefits.

Hardy oil firms are not likely to be deterred by such unrest, but anything that makes them more wary and imposes extra costs hinders development of an industry that Kenya, like other governments, hopes will generate new revenues to plug budget deficits and lift more people out of poverty.

“Risks for operators in this zone will in the end be at the cost of Kenya's exploration success and potentially lead to delays in the commercialization of discoveries,” said Duncan Clarke, chairman of Global Pacific and Partners, an advisory firm to the upstream industry.

“It will add some concerns, already emerging in Kenya, about tougher terms and state regulatory involvement,” he said.

Kenya is revising outdated laws governing the oil and gas industry. A draft law could go to parliament in November.

Others are also updating industry rules. Tanzania is drawing up a new gas policy, but has yet to issue it as a debate rumbles on about how much gas should be sold to foreigners.

Challenging areas

Elsewhere, a wrangle between Uganda and oil firms over whether to process crude or export it has pushed back production until 2016, a decade after oil was discovered. Uganda has now agreed with France's Total and China's CNOOC  on building a smaller refinery than it had earlier wanted.

After helping bring Ghana's discoveries to production, Tullow shows no sign of backing away from its Kenya and Uganda investment, but the shutdown in Kenya comes at a tricky time for the group.

It has suffered a greater number of dry holes this year than its investors have come to expect, and it is looking for a partner to take on the $4.9-billion development costs of its Tweneboa, Enyenra and Ntomme offshore Ghana project.

“I do believe Tullow is a good operator in challenging new areas,” said Mark Wilson, oil and gas analyst at Macquarie Securities in London, adding that the latest incident in northern Kenya should not be seen as too negative for the firm.

Tullow, which has a market capitalization of over $14 billion, estimates Uganda and Kenya could together export 500,000 barrels per day through a Kenyan pipeline.

But Wilson said Tullow faced a tough job managing expectations in the local community and needed government help.

“The company, with the best will in the world, can't actually predict how the Kenyan development will work out,” he said. “It is very difficult, particularly in a new area where there is literally no [oil and gas] industry whatsoever.”

You May Like

Italian Red Cross Chief: Don't Label Migrants 'Illegal'

Speaking at the United Nations headquarters in New York Wednesday Francesco Rocca says migrants are victims, not criminals More

US Intel Officials Cautious About New IS Threat

Threat, said to have been posted by alleged American member of Islamic State terror group, says Sunday’s attack in Texas ‘is only the beginning’ More

Eyes in Sky Monitor Weather, Predict Epidemics

Satellites track storms, population movements, ocean warming to predict disease conditions More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Mass Grave Exposes Entrenched Trafficking in Thailandi
X
May 05, 2015 5:50 PM
Police in southern Thailand have found two more camps believed to have held human trafficking victims -- one containing a buried skeleton. This comes just days after officials announced arrests in connection with the grisly discovery of 26 bodies in a mass grave at another location. Officials suspect as many as 400 mostly ethnic Rohingya from Myanmar were being held for ransom at the remote camp near the Malaysian border. Steve Sandford reports on developments in the case.
Video

Video Mass Grave Exposes Entrenched Trafficking in Thailand

Police in southern Thailand have found two more camps believed to have held human trafficking victims -- one containing a buried skeleton. This comes just days after officials announced arrests in connection with the grisly discovery of 26 bodies in a mass grave at another location. Officials suspect as many as 400 mostly ethnic Rohingya from Myanmar were being held for ransom at the remote camp near the Malaysian border. Steve Sandford reports on developments in the case.
Video

Video Russia's 'Victory Day' Glory Over Nazis Overshadowed by Ukraine

ussia is preparing to commemorate the 70th anniversary of the end of World War II, known since the Soviet era as “The Great Patriotic War,” with a massive parade on May 9th of military hardware and millions of medals handed out to veterans or their relatives. But critics say the Soviet-style display of power and nationalism overshadows tragic scars during and after the war that still influence politics and foreign policy, especially in the current Ukraine crisis.
Video

Video WWII Anniversary Brings Old Friends and New Worries

The 70th anniversary of the end of World War II has special significance, with Russia becoming more assertive in Ukraine and sending its military planes to the edges of western countries’ airspace. Changes in the geostrategic balance and the transatlantic relationship are felt across the continent, not least in German towns that have hosted U.S. military bases since the defeat of Nazi Germany. VOA’s Al Pessin visited Schweinfurt, Germany, where a large base closed last year.
Video

Video Abraham Lincoln Funeral Re-created for 150th Civil War Anniversary

Over the last four years, commemorative events to mark the 150th anniversary of the U.S. Civil War have brought thousands of visitors to battlefields and historic landmarks across the country. As VOA's Kane Farabaugh reports from the Midwest state of Illinois, the final event in the Civil War's sesquicentennial honors the final journey home of the slain American President, Abraham Lincoln.
Video

Video Campaign Raises Money to 'Uncuff' Journalists

Beginning Sunday – World Press Freedom Day – the Committee to Protect Journalists, a private U.S. group, is launching a campaign to bring attention to their plight and encourage efforts to free them. Deborah Block reports.
Video

Video Volunteers Pull Together to Aid Baltimore Riot Victims

Calm has returned to Baltimore, Maryland, after authorities lifted an overnight curfew imposed almost a week ago to stem the rioting that followed the funeral of Freddie Gray - the 25-year-old black man who died of spinal injuries suffered while in police custody. Six police officers, three of them African-American, have been charged in connection with his death. Baltimore is now trying to get back to normal, in part with the help of volunteers who responded to calls to help those in the city'
Video

Video From Aleppo To Berlin: Band of Brothers Escapes Civil War

Hundreds of thousands of Syrians have fled the civil war in their country and journeyed to Europe by boat across the Mediterranean. It is a terrifying ordeal with dangers at every turn. A group of Syrian brothers and their friends describe their ordeal as they try to reach Germany. VOA's Henry Ridgwell reports. ...
Video

Video Rural Nepal Suffers Brunt of Quake’s Devastation

Nepal is still coming to grips with the full extent of the devastation and misery caused by last Saturday’s magnitude 7.8 earthquake. Some of the hardest-hit communities have been cut off by landslides making it difficult to assess the precise toll. A VOA News crew has been among the first to reach a few of the smaller, remote communities. Correspondent Steve Herman reports from the Sindhupolchak district, east of Kathmandu, which suffered greatly in Nepal’s worst quake in more than 80 years.
Video

Video Obama Praises Work of 3 Immigrant Journalists

President Barack Obama met with three immigrant journalists at the White House Friday to praise them for their work ahead of World Press Freedom Day, May 3. In attendance: Dieu Cay (his pen name) a blogger from Vietnam recently released from prison; Lily Mengesha from Ethiopia who was harassed and detained for exposing the marrying off of young girls as child brides, and Fatima Tlisova, an ethnic Circassian from the North Caucasus region of Russia, who works for VOA's Russian Service.
Video

Video Middle East Atheist Channel Defies Taboo

In Egypt, a deeply religious country in a deeply religious region, atheism is not only taboo, it is dangerous. It is sometimes even criminal to publicly declare nonbelief. Despite the danger, one group of activists is pushing back with a new online channel that defends the right not to believe. VOA’s Heather Murdock reports.
Video

Video Nepal Quake Survivors Tell Their Stories

Against all hope, rescuers have found a few more survivors of the devastating earthquake that hit Nepal last Saturday. Mountain climbers and hikers trapped in remote places also have been airlifted to safety, and aid is finally reaching people in the areas closest to the quake's epicenter. Survivors and rescuers are now recounting their experience. Zlatica Hoke has this story.
Video

Video Lessons for Germany, Europe Remain on Anniversary of WWII's End

The 70th anniversary of the end of World War II will be marked May 8-9 in all European countries except Germany, which lost the war. How is the war viewed there, and what impact is it still having? From Berlin, VOA’s Al Pessin reports.
Video

Video Nepal Town Destroyed By Quake Counts Itself Lucky

Foreign search teams on Wednesday began reaching some of the communities outside Kathmandu that suffered worse damage than Nepal’s capital from last Saturday’s massive earthquake. VOA Correspondent Steve Herman is in Sankhu - a town of about 10,000 people - where there is relief the death toll is not higher despite widespread destruction.
Video

Video Somali Hotel Chain Owner Strives to Make a Difference

Many in the Somali diaspora are returning home to make a new life despite the continuing risks. Since 2011 when a military campaign against Al-Shabab militants began making progress, members of the diaspora community have come back to open hospitals, schools, hotels, restaurants and other businesses. Abdulaziz Billow in Mogadishu profiles the owner of a chain of hotels and restaurants who is helping to bring change to the once-deadly Somali capital.
Video

Video Child Migrants Cross Mediterranean Alone, Face Unknown Future

Among the thousands of migrants making the deadly journey by boat to Europe, there are unaccompanied girls and boys. Some have been sent by relatives to earn money; others are orphaned or fleeing war. From a shelter for young migrants in the Sicilian town of Caltagirone, VOA's Henry Ridgwell reports.

VOA Blogs