From: Biniam Haile \(SWE\) (eritrea.lave@comhem.se)
Date: Thu Jan 21 2010 - 09:37:43 EST
A Glimpse into East Africa's Natural Resources
Monday, 14 December 2009 14:45
By Olad Hassan
East Africa is believed to have one of the biggest oil deposits in the
world. Companies, both western and Asian, are hunting in earnest for oil
and gas in the region. East African countries are experiencing one of
the highest levels of investment in the world right now. However, year
long conflict and political instability made the region to one of the
riskiest places for local and foreign investment. Mainly due to the
region's trouble zones, the Horn of Africa and the Sudan Region of
Darfur, which are believed to have the biggest deposits in natural
resources.
Eritrea.
Eritrea is Africa's youngest nation, having gained its independence from
Ethiopia in 1993. It lies to the north of Ethiopia and forms part of the
North East African Region. The two-year war between Eritrea and
Ethiopia that began in 1998 has badly affected Eritrea's economy, as
Ethiopia was one of Eritrea's major trading partners.
Eritrean mining and oil resources might soon become key elements of the
countries economy. Two mining companies, Nevsun Resources and Chalice
Gold, have announced to start within the next two years gold production
in the Red Sea State. This will add Eritrea to the list of mineral
exporting countries in Africa. Several other companies such as Sunridge
Gold Corp. and South Boulder Mines have also projects and mining assets
in Eritrea.
Oil resources in Eritrea are believed to be substantial although there
is little information available in this regard. In 2008 the Government
of Eritrea signed two agreements with Defba Oil Share Company on oil
exploration and development. The company is supposed to undertake oil
exploration activities in two blocks of the Eritrean northern
territorial waters. The Defba Oil Share Company has been set up through
the partnership of the Eritrean government and Energy Alliance Company
W.L.L.
Hydrocarbon exploration, primarily offshore in the Red Sea, began in the
1960's when Eritrea was still federated with Ethiopia. In 1995, Eritrea
signed a production sharing contract (PSC) with U.S.-based Anadarko
Petroleum (Anadarko) for the offshore Zula Block. Anadarko signed a
second PSC for the offshore Edd Block, located south of the Zula Block,
in September 1997.
Anadarko announced, in December 1997, that it had reached an agreement
with ENI/Agip (Agip) to swap interests in exploration acreage. Anadarko
received a 25% interest in a Tunisian block operated by Agip, and Agip
received a 30% share in the 6.7-million acre Zula Block and 30% interest
in the Edd Block. Burlington Resources, a U.S.-based independent, later
joined the consortium by acquiring a 20% interest in both acreages.
Anadarko's first two exploration wells, both drilled on the Zula Block,
were unsuccessful. In January 1999, a third dry well, Edd-1 on the Edd
Block, was drilled. Citing the disappointing exploration results,
Anadarko and its partners ceased exploration activities and relinquished
their rights to the offshore blocks.
Somalia.
Somalia has been without a functioning government since 1991, when
former Mohamed Siad Bare's Regime was over thrown.
In a 1991 a World Bank coordinated study intended to encourage private
investment in the petroleum potential of eight African nations, Somalia
and the Sudan topped the list of potential commercial oil producers.
The earliest indication of oil in Somalia was a large oil seep southeast
of Berbera and several other seeps in various locations of the
Somaliland province which considers itself independent from the rest of
Somalia.
However, early exploration concentrated on an anticline structural
approach since this had met with success in the Arabian Peninsula it
took the oil companies a number of years to abandon this approach in
Somalia. There is no evidence of large scale compressive folding in
Somalia and the anticlines in the north of the country appear to be
associated with the Miocene separation of Africa and Arabia and hence
post-Mesozoic and early Tertiary oil and gas accumulations. Therefore,
hydrocarbon accumulations must be sought in older structures and strata
graphic traps.
Puntland, remains one of the last under-explored regions that have high
potential for vast reserves of hydrocarbons. During the late 1980's the
State was divided into a number of concessions for oil exploration.
Significant exploration was undertaken but this effectively ceased due
to political instability that arose in 1991. However, there exploration
activities have never ceased for good.
For example Australian exploration company Range Resources LTD. has been
conducting studies on the mineral resources of the region during 2006
with a team of geologists based in Bosasso on the northern coast. The
geological work has identified the potential of large silver rich lead
zinc deposits analogous to the Jabali deposit in southern Yemen.
The agreements that Range Resources has entered was followed by intense
negotiations between the Parties and their legal advisors. As part of
this process the Parties have satisfied themselves that all previous
mining concessions have lapsed.
The government of the semi-autonomous Puntland province has given Range
Resources of Australia and Canmex Minerals of Canada joint E&P rights in
parts of the region. The exploration period of its Somalia oil projects
have been extended from 36 months to 48 months with the Somalian
authorities, this is positive news as both sides see a reason to
continue exploration in the area.
China National Offshore Oil Corporation's (CNOOC) deal covers another
part of Puntland and was endorsed by former President of Puntland and
Somalia, Abdullahi Yusuf Ahmad, who hailed from the province, even
though the transitional government's authority there is tenuous. The
prime minister himself has questioned the validity of the Chinese
agreement because it was signed before the new oil law was in place.
The war torn nation is now under the eyes of Investors. Early 2007, the
state-owned Chinese oil giant has signed a PSA with the former Somali
Prime Minister, Ali Mohamed Gedi a, which ranks as a high-risk frontier
even in an industry well accustomed to dangerous environments.
Kenya.
The East African republic of Kenya has no known oil or gas reserves. The
Kenyan government is encouraging foreign interest in oil exploration and
there is a modest upstream oil industry. It is endowed with other energy
sources including wood fuel, coal, solar and wind power, much of which
is untapped. The country's commercial energy needs are supplied by
electricity, coal, fuel wood and oil-derived products
Petroleum is Kenya's major source of commercial energy and has, over the
years, accounted for about 80% of the country.s commercial energy
requirements. Demand for oil in Kenya is quite small due to the
country.s underdeveloped economy, which is heavily dependent on labour
intensive and rain-fed agriculture systems. The domestic demand for
various petroleum fuels on average stands at 2.5 million tons per year,
all of it imported from the Gulf region, either as crude oil for
processing at the Kenya Petroleum Refineries Limited or as refined
petroleum products.
Uganda.
Also in nearby Uganda, there is euphoria over oil discoveries as the
region is sailing up as a new hydrocarbon producing zone attracting
foreign investments. Early 2007, Ugandan President Yoweri Museveni used
the national thanks-giving service day in the capital Kampala to
announce the discovery of oil in his country by London based explorer
Tullow Oil. This discovery followed several years of the country's
painstaking search for oil.
The prospect Uganda becoming an oil producing country soon has caused a
lot of excitement among many Ugandans. Even the government has boasted
of the possibility of import savings of about a billion dollars (almost
2 trillion shillings) a year if the country's oil needs are met from
domestic oil supply, freeing much needed foreign exchange, and even of
the possibility of Uganda becoming a net oil exporter.
This follows the confirmation Hardman Resources; an Australian drilling
company working in conjunction with Tullow Oil from the United Kingdom,
that Uganda has the capacity to produce oil to a tune of 10,000 barrels
per day.
The world's current oil consumption stands at 80 million barrels of oil
per day having gone up from 65 million barrels per day (bpd) over the
last five years. This jump in demand is a result of China and India's
rising demand of oil. Locally, Uganda's demand for oil products is also
rising at a rate of 6 % per day. Last year, Uganda consumed 700,000 cm
of petroleum products worth $250 million. Per day, the country's fuel
needs stand at 50,000 cm (1,000 litres make up 1 cm). Per capita
consumption of petroleum in Uganda has grown from 16 litres in 1991 to
24 litres at end of 2004 and that figure must be higher now.
At the cost of $70 (about 125, 000 shillings) a barrel, the average
current price, 4,200 barrels a day from Waraga 1 would generate about
$294,000 (Shs 546m) a day and Shs 199.5 bn annually just from one well.
Ethiopia.
Ethiopia is endowed with energy resources such as coal, biomass, solar
energy and natural gas and is not a great consumer of petroleum fuels.
Current natural gas reserves are estimated to be 24 million cubic
meters.
Just recently Ethiopia signed an oil exploration agreement for petroleum
onshore development in the Ogaden Basin with Sweden- based Lundin East
Africa Bv. There are in total 11 foreign companies exploring Oil in
Ethiopia including Africa Oil Corporation, South West Energy and
Malaysia's state-owned Petronas. The Ethiopian government has announced
that it will offer further 14 licences for oil and gas exploration over
a period of three years starting from 2009.
In June 2003, the Ethiopian government signed an oil exploration deal
with Malaysian company Petronas for 5,800 square mile tract in Gambela,
in the far western part of the country. The region is closely related
the Sudan oil fields. Petronas has committed to investing in regional
infrastructure, employing local staff, improving health services, and
developing the skills of the ministry of Mines. Petronas is also
interested in natural gas exploration in Ogadenia region.
Ethiopia is totally reliant on imports to meet its petroleum
requirements. Some petroleum imports are received at the port of
Djibouti, and shipped via rail and tanker truck to Ethiopia. With the
recent development of oil in Sudan, however, Ethiopia has begun
importing oil which, under COMESA, is not subject to tariffs. Oil
imports from Sudan began in January 2003 transported by tanker trucks
along a new road between the two countries.
Petronas, is going to drill three oil exploration wells in Ethiopia's
Ogaden basin. They have hired a Dubai-based exploration company to
replace China's Zhonguyuan Petroleum Exploration Bureau, which refuses
to go back to the region, after the Ogaden National Liberation Front, an
ethnic Somali separatist group, attacked a Chinese-run exploration site,
killing 65 Ethiopian and nine Chinese
http://www.ogaden.com/opinion/556-a-glimpse-into-east-africas-natural-re
sources
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