Wednesday, April 18, 2012

Eastern Africa coast: An emerging fossil fuels giant

An oil rig. These monsters discover oil from the earth's bowels
THE ENTIRE EASTERN Africa coast is emerging as a fossils fuels giant. A flurry of finds of commercially viable deposits of oil and natural gas has spawned intense activity in exploration of these resources.

In the last decade or so, commercially viable oil deposits were found in South Sudan and Uganda. Natural gas has been found in Tanzania  while in Kenya an oil find announced this week, is awaiting commercial verification. There are reports of viable oil deposits in lawless Somalia.

Since it takes about three years or so to verify commercial viability, the implication here is by 2016/17, this region of an estimated population of 200 million people will be a major player in the world’s energy market. An exploration mapping high potential areas in Kenya, indicates that eastern Africa could rival some middle east oil producers.

The frequent discoveries raise confidence on the potential of the region’s fossil oil’s exploration. This is expected to attract more investments into exploration in eastern Africa. So far an estimated US$8 billion has been sunk in oil exploration since 2006. However, this figure is expected to rise as more explorers seek licenses to explore for oil and gas deposits.

 Tanzania  for example, will hold an oil exploration licensing round for 16 offshore blocks starting in September this year, reported Reuters. Some firms spend an estimated US$2 million a day in oil exploration in east Africa, say sources in the energy sector.   Tullow oil Plc, which discovered oil in Uganda, Kenya and Ghana is said to have sunk an estimated US$800 million in Uganda.

 It is not clear how much has sunk in Kenya where it has struck oil at the first well. The find, what they describe as 20 metres of net oil, was struck at 1,041 metres way below the expected depth of 2,700 metres. The company says it will still drill up to 2,700 metres.

Apart from spending on exploration, more investment is expected in construction of infrastructure, Including Refineries, Oil Pipeline, railroads, roads and other related infrastructure. See  .  In Uganda, reported the East African, the consortium led by Tullow oil Plc will sink another US$10 billion to build such infrastructure. Tanzania will invest some US$1.1 billion to build a gas transportation pipeline from Songo  Songo wells to Dar-Es-salaam, the capital city.

This is how to make Oil and Gas windfall a boon-Experts

Investing in Roads, housing and Water and
 electricity supplies among others 

would  benefit every one 

 COMMENTS IN RESPONSE to  my  or comments on the subject matter is positive that well managed oil  and gas windfall can  boost development in east Africa. Many have suggested ways in which to turn the windfalls into a boon for the region. here is a synthesis of their views

One of the commentators, the President of the Africa Development Bank, AfDB, Donald Kaberuka is poignant.  He advised east Africa to avoid increasing recurrent expenditure and instead use the windfall on development expenditure. Mr. Kaberuka was speaking in an interview with the wire service, Reuters He argued that increasing recurrent expenditure, especially through sharp increases of public sector salaries will lead to high inflation and eventually conflict.

Economists and oil industry experts in Nairobi agree with this view. They argue that, the public sector is the single largest employer in east Africa. Sharp increases of public sector salaries, experts argue, will increase domestic demand for goods and services which in turn lead to high rates of inflation.

This is how it works: currently, there is a given stock of goods and services in the region. This stock ranges from food, to housing to schools and health facilities, to locally manufactured consumers goods, to power plants, oil refineries roads, railroads  similar infrastructure. In the short-run this stock is more or less fixed as it depends on the availability of other factors. To increase this stock will require expansion of production capacity and the infrastructure to produce and distribute the goods and services equitably.

Tanzania Stalls EA Monetary Union negotiations

President Jakaya Mrisho kikwete:
Combative  president combative Country?

Tanzanians have, as usual, stalled the negotiations on the creation of Monetary Union inEast Africa. Media reports say that the Tanzanian delegation to the task force on the creation of a monetary union, at EntebbeUganda, opposed every item in the background Paper.

The background paper will eventually become the protocol for the East African Monetary Union.  At the table for discussion was Article 24 which proposes a universal monetary and fiscal policy.

President Kibaki of Kenya:
The Giant of the region worrying Tanzania
The delegation also stalled article 17, which proposes that member states coordinate tax policies at the community level. This will require that partner states to disclose fiscal policies to other partner states.

These two proposals mean that member-states will have to cede some of their sovereign power to a regional authority such as an East African Central Bank and common Customs Authority.

The refusal by the Tanzanian delegation to discuss these issues did not surprise many Observers in the region. Tanzanian delegations have always stalled discussion on the creation of East African Common Market right from the start. At times, said a delegate familiar with Tanzanian attitude, “they just flatly refuse to discuss an issue, declaring an imaginary dispute.”

It is for this reason that the integration process has always virtually been forced downTanzania’s throat, says a source familiar with the process.

Beginning with the East African co-operation in the 1995 to the customs Union in 2005 and the East African Common Market in 2010, Tanzania is the reluctant partner, said the source. In fact, she agreed to the East African Common Market protocol when it became clear that other members were ready to leave her out.