East Africa attracts hunters for oil and gas

Oil companies, both western and Asian, are hunting in earnest for oil and gas in East Africa, a still largely under-explored region, as energy nationalism in Russia, Venezuela and the Middle East closes off opportunities in more proven areas.

“East Africa, for a frontier area, is experiencing one of the highest levels of investment in the world right now – but we’re only seeing the beginning,” said Chris Matchette-Downes, vice president of business development at Black Marlin Energy, an oil service company based in Dubai and specializing in the region.
About $500 million is being spent on research but so far only about 479 wells have been drilled from Eritrea to Cape Town including Madagascar, compared with as many as 30,000 in northern and western Africa, he said.

Significant discoveries of oil could help some countries in the region reduce their dependence on aid and expensive imported oil and help wean their residents from chopping down trees for household fuel. Exploitation, however, could be difficult and require costly infrastructure development. Except for a rickety rail network, not rehabilitated since colonial times, most of the region lacks pipelines and ports to export oil.

While some countries, like Sudan and Ethiopia, are showing early promise as oil and natural gas producers, Freedom House, an independent monitor, rated these two countries as among the most repressive regimes in the world. Many countries in East Africa, moreover, are in only the early stages of setting up a regulatory and legal framework for the oil industry. Oil companies worry whether their contracts will be respected.

Still, even at this early stage, oil has recently been found in Uganda and in Madagascar. Gas has been discovered in Tanzania and Ethiopia. Oil production is rising steadily in Sudan. Seismic studies and drilling are proceeding steadily in Kenya, Mozambique, the semi-autonomous Somali province of Puntland, and in the waters surrounding the Seychelles. The shores of Zanzibar are attracting interest from international oil giants, like Royal Dutch Shell.

But the geology of East Africa is more complex than that of the western side of the continent, so oil deposits will be more challenging to find in the east, seismic experts say.

International Herald Tribune