Oil and gas situation in East Africa

Some of our students went to Nairobi as part of IESE curriculum. They worked for a week on a consulting project focussed on the oil and gas situation in East Africa. We thought it would be useful to share what they have learnt about this market. When it comes to oil in Africa, most of the people think about Nigeria and Angola but there might be a new Eldorado…

Currently, the country that has the most immediate potential within the region is Mozambique. With an estimated reserve of 150 trillion of cubic feet of liquified natural gas, the country has on-shore and off-shore concessions. At the moment, most of the companies in the region are focussing on this country. But they have to keep in mind that ENH, the state-owned hydrocarbon company  always takes a stake in each in project (between 10% and 30%).

The next interesting country is actually the youngest one of the African continent: South Sudan. With a mature industry established in Bantiu, the country has been producing oil for years but they are now facing other difficulties. Currently, their only export route to the ocean is Sudan, that is charging a hefty price. Discussions have been going on between Kenya and South Sudan to actually build a pipeline linking Bantiu to Mombasa, the main Kenya coastal city. Although, the market is interesting (with other untapped regions), South Sudan still faces security issues.

Relying on its oil field next to Lake Albert, Uganda has the potential to become a major oil exporter within the region but many issues are currently rising. First, the country does not have any access to the ocean and only relies on a pipeline currently under construction connecting the Tanzanian coast to the country. Second, Tullow is facing difficulties because their Ghana projects delivered much less than expected, leading to a £800m write-off. Ultimately, Tullow’s CEO resigned. Following all of this, the company chose to focus on strategic projects and is trying to leave Uganda. Finally, the government and the other players (Total and CNOOC) are battling over fiscal disagreements, postponing the investment in the new wells. With a bit of luck, everything should start in Q4 of 2020.

Although, Tullow confirmed their intention to stay in Kenya, this country is also facing similar issues. With oil discovered in the Turkana region, the entire local industry is waiting for the Final Investment Decision to start any project. With an expected size of $4 billion, delays are expected and with the presidential elections coming in 2022, Phase 1 (first 200 wells) will only be fully operational in 2024 with a new pipeline linking Turkana and Luma.

Tullow employees at Turkana

Finally, the last country is Tanzania with only gas located either offshore or not in deep water. Interestingly enough, the government is pushing all industries to use as much gas as possible, as a cheaper resource to boost development.

After this overview of the oil and gas situation in East Africa, the main question that should be answered one day is why these countries do not offer petroleum products with high added value?

To dig deeper in these aspects, why not attending our Global Energy Day ?