Oil
Breeding Challenges in East Africa over Oil Discoveries
WASHINGTON — Significant oil reserves have been discovered in Uganda and Kenya in recent years. However before Kenyans and Ugandans can benefit from the discoveries infrastructure challenges, political issues and special interests must be overcome say experts.
In the last two years the Irish exploration company, Tullow Oil, confirmed reserves of 1.7 billion barrels of crude oil buried near the shores of Lake Albert in Uganda. Across Uganda’s border to the north, the company next discovered an estimated 300 million barrels in Kenya and is now exploring in southern Ethiopia, tracing a Great Rift hydrocarbon basin that promises economic transformation for some of the world’s poorest countries.
Tullow’s success has attracted major producers from around the world, including France’s Total, China National Offshore Oil Corporation (NCOOC), Exxon and Chevron. More major oil interests are expected soon, including Brazil.
The industry is excited. “Now every potential hydrocarbon basin across East Africa is the subject of intense interest,” writes Bill Page in the annual Deloitte guide to oil and gas in East Africa.
“More hydrocarbons have been discovered in East Africa in the last two years than anywhere else in the world,” a senior oil company executive told Page. Natural gas has been also discovered offshore, but public attention in these countries has focused on the potentially faster returns from pulling East Africa’s oil out of the ground first.
For one of the poorest and least-developed regions of the world, Page said “the arrival of the international oil and gas industry offers hope for a better life for millions.”
Extracting oil in East Africa offers the potential for development, said Mwangi Kimenyi, director of the Brookings Institution’s Africa Growth Initiative (AGI), “but there is likelihood that this might not turn out to be so and may instead be a curse.”
“Unfortunately, the capacity to negotiate contracts is still mired in secrecy and underhanded dealings,” Kimenyi said. “My take is that contracting is still not open and there is still a great deal of ‘conspiracy’ between foreign firms and the local leaders.”
“On the one hand we have levels of cooperation that are pretty impressive,” said Ken Menkhaus, a Davidson College professor and East Africa scholar. For cooperation, he cited the three-nation peacekeeping effort in Somalia and the eight-country Intergovernmental Authority on Development.
“But just beneath the surface there are all sorts of rivalries that inhibit cooperation and in some cases dramatically,” Menkhaus added. “There is a fair amount of tension on a whole range of political and economic interests and the oil interest seems to be bringing some of these things to the fore.”
Menkhaus said oil can curse countries in two ways: distort an agricultural economy or encourage greed among local elite. He fears the latter in East Africa. “Instead of sharing resources and an accountable use of them, it’s going to fuel massive corruption in an already very corrupt region and produce armed conflict.”
Groups such as Brookings’ AGI, the Norwegian Agency for Development Cooperation and New York-based Revenue Watch Institute are educating governments, civil society and local media to the choices and the pitfalls.
Oil industry leaders also recognize how sudden oil riches can destabilize a country. Fareed Mohamedi, a vice president for industry analysis at Norway’s Statoil told industry leaders during an International Institute of Strategic Studies conference in London about the rivalries between 42 ethnic groups in Kenya, and described the union of Kalenjin and Kikuyu votes that led to electoral success for President Uhuru Kenyatta.
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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