EAST AFRICA : Big oil discoveries expected in region : experts...

EAST AFRICA : Big oil discoveries expected in region : experts

March 1, 2006, 5 hours, 39 minutes and 12 seconds ago.

By Andnetwork .com

EXPERTS are expecting big oil discoveries in East Africa that could significantly alter the region's economic fortunes.

Results of recent geological surveys suggest that East Africa may soon become one of the world’s hottest oil exploration zones, with data analysed last year by Jebco Seismic, a UK-based geophysical contractor, showing major oil deposits off the coasts of Kenya, Tanzania, Mozambique and Madagascar.

In addition, the same rock formations now yielding large quantities of oil in Sudan are known to stretch into Kenya, Uganda and Tanzania, says Jebco marketing director Chris Machette-Downs.

"It is an unusual system, both geologically and in terms of the quality of some of the oil. Some sites in Sudan have generated oil you could pour straight into your Jeep," said Mr Machette-Downs.

Kenya, for instance, has been agog with talks of oil prospects leading to a series of exploration expeditions, especially at the coastal strip.

An official at Kenya's Ministry of Energy, Wangari Githii, last week told The EastAfrican that the data obtained from the Kenyan offshore by Woodside Energy company is being interpreted in Australia with the hope that "we will strike oil."

Earlier surveys done by the US Department of the Interior found that the Kenyan coastal strip has the potential of producing about 100 million barrels of crude oil and over 600 million cubic feet of natural gas.

The same sentiments are held in Tanzania, where the Commissioner for Energy, Petroleum and Gas in the Ministry of Minerals and Energy, Basil Mrindoko last week told The EastAfrican, "The search for oil continues–We have yet to confirm that we have oil, but the presence of natural gas as a hydrocarbon was an early sign that there is hope," he said.

Tanzania, for instance, will from next month be pumping natural gas from Songo Songo island in the southern Tanzanian waters of the Indian Ocean to Dar es Salaam, 232 km away. The island is said to have huge gas reserves, enough to last about 40 years.

Mr Mrindoko said two companies were already actively searching for oil: Ndovu Resources at Nyuni and Panafrica Energy at Songo Songo area. The government is in the process of finalising arrangements with another two or three companies that have also shown interest in oil exploration.

In Uganda, three international oil companies have so far invested more than $20 million in prospecting for oil, a senior official at the Ministry of Energy and Mineral Development said last week.

An Assistant Commissioner with the Petroleum Exploration and Production Department, Ministry of Energy and Mineral Development, Ernest N.T. Rubondo, said that oil exploration in Uganda had resulted in the sinking of three exploration oil wells.

The exploration is taking place in the Albertine Graben, the northernmost part of the western arm of the East African Rift Valley system along Lake Albert in northwestern Uganda.

The companies include Heritage Oil and Gas Ltd, which was in 1997 licensed to prospect Area Three in the Semiliki Basin. Hardman Resources and Energy Africa were licensed in 2001 for exploration of Area Two in the Northern Lake Albert Basin, which borders the Democratic Republic of Congo.

If expected discoveries are made in the next year or two, East Africa could begin producing significant amounts of oil early in the next decade, Mr Machette-Downs calculates. He cautions, however, that not all suspected "sweet spots" will fulfil their promise.

"We’re not going to get the masses of petroleum we have had in Nigeria," said Mr Machette-Downs, who, however, added that he does expect the East Africa finds to be larger than those of secondary sources in West Africa, such as Gabon.

Much of the oil pumped from wells in East Africa would likely be exported to the emerging industrial giants of Asia, Mr Machette-Downs suggests. Just as most of West Africa’s oil makes its way to ports in the US, East African oil could be most efficiently shipped to energy-hungry customers in India and China.

The prospect of Kenya, Tanzania and Uganda emerging as significant oil suppliers may account for China’s growing diplomatic and economic involvement in East Africa, Mr Machette-Downs says.

At the same time, East African countries would benefit directly from major oil discoveries within their borders. Abundant domestic supplies would eliminate the need for oil imports, thus producing considerable savings for businesses as well as generating ample tax revenues for governments, besides ecological gains.

In a separate interview with a US State Department publication, Mr Machette-Downs cited the example of Tanzania, of which he says "Just a little oil there would solve so many problems; Tanzanians would not have to chop down the rest of their trees just to produce energy."

Until recently, East Africa’s potential oil fields remained underexplored for a variety of reasons. Petroleum prospectors point to the instability that has plagued parts of the sub-region, the remoteness of some sites, and the challenges posed by geological factors.

It now seems clear to Mr Machette-Downs and other specialists that most of these obstacles will be overcome or circumvented.

Some of the most encouraging sites in Kenya and Tanzania lie offshore – which would allow shipments to be made much more easily than from fields far upcountry, such as in western Uganda. In addition, technological advances in recent years have prompted experts to take a second look at test results that appeared unpromising a decade or two ago.

The source of all these potential deposits is the East African Rift and adjoining formations. While the interior sections of the rift zone consist mainly of volcanic rock, the system has been found to contain several sedimentary basins as well. It is from those onshore and offshore basins that oil would be extracted.

This could be welcome news for Kenya, where oil explorations have been going on since 1950s without tangible results.

Compared with Sudan, which has sunk about 80 wells, Kenya has only sunk about 30 test wells despite the fact that Sudanese oil fields are more or less geologically the same as Kenya's Northern Rift Valley. Experts, however, explain that the exorbitant cost has been a major constraint. A single well could cost as much as Ksh400 million ($5 million).

As a result, explorations can only be done by companies who sign production sharing agreements, with the hope of recovering their money once they strike oil.

The Kenya government gives the National Oil Corporation of Kenya – the government agency that licenses and markets explorations – Ksh100 million ($1.28 million) annually to undertake preliminary surveys, from which the data is sold to various companies that might be interested in explorations.

Despite lack of serious explorations in Tanzania, records show that oil presence had been noted on Pemba Island as far back as 1977.

Source : East African Standard