East Africa has never been seen as an area rich in natural resources. But recent discoveries of potentially lucrative reserves of oil and natural gas have changed that viewpoint. Could these untapped fuel supplies provide just the boom needed to ignite the ailing economies of countries in Africa’s eastern region?
WIth discoveries of vast oil and supplies in countries such as Mozambique, Tanzania and Kenya, the eyes of the world’s biggest energy companies are set firmly on this part of the world – and they’re ploughing billions of dollars into the region to find out how much more could be available.
Mozambique, which hugs the coastline along south-eastern Africa, was home to four of the five biggest global oil and gas discoveries in 2012, three of which were made by Italian oil giant Eni, and experts have predicted the scale of these discoveries could potentially turn the African country into a gas-exporting super power on a par with Qatar and Australia. Eni claims to have found 68 trillion cubic feet of natural gas off Mozambique, the equivalent of 12 billion barrels of oil, of which a high proportion is thought to be recoverable.
The Italian firm’ share in the discoveries is potentially worth up to $15 billion but concerns have already been expressed that the riches being tapped by foreign investment in Mozambique and neighbouring countries will not filter down to local people.
The ease of access to lucrative Asian markets from Africa’s east coast, relatively lower costs compared to liquified natural gas (LNG) plants in Australia and the belief that the gas reserves under the coastal waters are deep has all meant that Eni is not alone in circling the area, with major global energy firms such as Petrobras, BG Group, Royal Dutch Shell all looking to buy shares in east African gas fields, while US company Anadarko hopes to start work on a Mozambique LNG plant this year. In August, Irish firm Cove Energy sold its own 8.5 per cent stake in a Mozambique block to Thailand’s PTT Eploration and Production for $1.9 billion.
That deal earned $175m (12.8 per cent) tax income for the Mozambique government, but without state-owned gas companies of the size of foreign giants, setting effective policies to ensure appropriate taxations and provision of local jobs is key to ensuring East Africa as a region actually benefits from this energy boom. Mozambique has already begun to see rising prices of food, transport and electricity following the arrival of multi-billion dollar investment, but with little evidence yet that local people are in any better position to afford such price hikes.
Tanzania and Mozambique have already begun the process of ringfencing hydrocarbon earnings, but perhaps the biggest challenge lays in training local people to ensure that East Africa can provide the qualified technicians and engineers needed to run export operations in the decades to come.