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

    Escalation of Media Crackdown in Turkey Heightens Concerns

    Critics see 'a new dark age' as arrests of journalists, closures of media outlets by Erdogan government mount

    Russia Boasts of Troop Buildup on Flank, Draws Flak

    Russian military moves counter to efforts to de-escalate tensions, State Department says

    Video Iraqis Primed to March on Mosul, Foreign Minister Says

    Iraqi FM Ibrahim al-Jaafari tells VOA the campaign will meet optimistic expectations, even though US officials remain cautious

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Immigrant Delegate Marvels at Democratic Processi
    X
    Katherine Gypson
    July 27, 2016 6:21 PM
    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video A Life of Fighting Back: Hillary Clinton Shatters Glass Ceiling

    Hillary Clinton made history Thursday, overcoming personal and political setbacks to become the first woman to win the presidential nomination of a major U.S. political party. If she wins in November, she will go from “first lady” to U.S. Senator from New York, to Secretary of State, to “Madam President.” Polls show Clinton is both beloved and despised. White House Correspondent Cindy Saine takes a look at the life of the woman both supporters and detractors agree is a fighter for the ages.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video First Time Delegate’s First Day Frustrations

    With thousands of people filling the streets of Philadelphia, Pennsylvania for the 2016 Democratic National Convention, VOA’s Kane Farabaugh narrowed in on one delegate as she made her first trip to a national party convention. It was a day that was anything but routine for this United States military veteran.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.

    Special Report

    Adrift The Invisible African Diaspora