Eastern Africa

The Eastern Africa Energy Conference 2010 currently taking place in Kenya is to showcase East Africa as a new oil exploration frontier in the region.

The conference is part of worldwide suite of senior management events in/on Africa that has been conducted annually for over 16 years, and is endorsed by the Ministry of Energy, Kenya and the National Oil Corporation of Kenya.

Participating states and experts will examine emerging global oil and gas issues, economics and models driving the industry besides the black gold’s curse among others.

Further, Government policies, state interventions in the oil/energy market, state oil/energy companies, private energy investments and interests, corporate portfolio and strategies, new entrants, competition and regulation, inter-fuel issues, product pricing, taxation and the financing of non-hydrocarbon ventures, plus critical issues impacting the Eastern African future will be discussed.

It showcases the regional oil/gas and energy game in Kenya, Tanzania, Uganda, Rwanda, Burundi, DRC, Sudan, Ethiopia, Eritrea, Somalia, Seychelles, Madagascar and Mocambique, and focuses on the corporate players (private and state entities) that are shaping the fast-moving dynamics one of the Continent’s rapidly growing energy markets – upstream, midstream, downstream, and in gas/power, CBM/CTL, as well as in renewables and biofuels.

On the first evening of the Eastern Africa Energy Conference organizers will host the 31st PetroAfricanus Dinner, with Guest Speaker: Jeff Hume, Managing Director, Upstream Petroleum Consultants.

Inside the week is a special and unique 3rd Petroleum Industry Fundamentals Industry Training Workshop presented by Dr Duncan Clarke, the world’s leading authority on African oil and gas and global national oil companies, as well as the author of the widely-acclaimed Crude Continent; The Struggle for Africa’s Oil Prize (Profile, 2008).

By Olad Hassan

East Africa is believed to have one of the biggest oil deposits in the world. Companies, both western and Asian, are hunting in earnest for oil and gas in the region. East African countries are experiencing one of the highest levels of investment in the world right now. However, year long conflict and political instability made the region to one of the riskiest places for local and foreign investment. Mainly due to the region’s trouble zones, the Horn of Africa and the Sudan Region of Darfur, which are believed to have the biggest deposits in natural resources.

Somalia.

Somalia has been without a functioning government since 1991, when former Mohamed Siad Bare’s Regime was over thrown.

In a 1991 a World Bank coordinated study intended to encourage private investment in the petroleum potential of eight African nations, Somalia and the Sudan topped the list of potential commercial oil producers.

The earliest indication of oil in Somalia was a large oil seep southeast of Berbera and several other seeps in various locations of the Somaliland province which considers itself independent from the rest of Somalia.

However, early exploration concentrated on an anticline structural approach since this had met with success in the Arabian Peninsula it took the oil companies a number of years to abandon this approach in Somalia. There is no evidence of large scale compressive folding in Somalia and the anticlines in the north of the country appear to be associated with the Miocene separation of Africa and Arabia and hence post-Mesozoic and early Tertiary oil and gas accumulations. Therefore, hydrocarbon accumulations must be sought in older structures and strata graphic traps.

Puntland, remains one of the last under-explored regions that have high potential for vast reserves of hydrocarbons. During the late 1980’s the State was divided into a number of concessions for oil exploration. Significant exploration was undertaken but this effectively ceased due to political instability that arose in 1991. However, there exploration activities have never ceased for good.

For example Australian exploration company Range Resources LTD. has been conducting studies on the mineral resources of the region during 2006 with a team of geologists based in Bosasso on the northern coast. The geological work has identified the potential of large silver rich lead zinc deposits analogous to the Jabali deposit in southern Yemen.

The agreements that Range Resources has entered was followed by intense negotiations between the Parties and their legal advisors. As part of this process the Parties have satisfied themselves that all previous mining concessions have lapsed.

The government of the semi-autonomous Puntland province has given Range Resources of Australia and Canmex Minerals of Canada joint E&P rights in parts of the region. The exploration period of its Somalia oil projects have been extended from 36 months to 48 months with the Somalian authorities, this is positive news as both sides see a reason to continue exploration in the area.

China National Offshore Oil Corporation’s (CNOOC) deal covers another part of Puntland and was endorsed by former President of Puntland and Somalia, Abdullahi Yusuf Ahmad, who hailed from the province, even though the transitional government’s authority there is tenuous. The prime minister himself has questioned the validity of the Chinese agreement because it was signed before the new oil law was in place.

The war torn nation is now under the eyes of Investors. Early 2007, the state-owned Chinese oil giant has signed a PSA with the former Somali Prime Minister, Ali Mohamed Gedi a, which ranks as a high-risk frontier even in an industry well accustomed to dangerous environments.

Kenya.

The East African republic of Kenya has no known oil or gas reserves. The Kenyan government is encouraging foreign interest in oil exploration and there is a modest upstream oil industry. It is endowed with other energy sources including wood fuel, coal, solar and wind power, much of which is untapped. The country’s commercial energy needs are supplied by electricity, coal, fuel wood and oil-derived products

Petroleum is Kenya’s major source of commercial energy and has, over the years, accounted for about 80% of the country.s commercial energy requirements. Demand for oil in Kenya is quite small due to the country.s underdeveloped economy, which is heavily dependent on labour intensive and rain-fed agriculture systems. The domestic demand for various petroleum fuels on average stands at 2.5 million tons per year, all of it imported from the Gulf region, either as crude oil for processing at the Kenya Petroleum Refineries Limited or as refined petroleum products.

Uganda.

Also in nearby Uganda, there is euphoria over oil discoveries as the region is sailing up as a new hydrocarbon producing zone attracting foreign investments. Early 2007, Ugandan President Yoweri Museveni used the national thanks-giving service day in the capital Kampala to announce the discovery of oil in his country by London based explorer Tullow Oil. This discovery followed several years of the country’s painstaking search for oil.

The prospect Uganda becoming an oil producing country soon has caused a lot of excitement among many Ugandans. Even the government has boasted of the possibility of import savings of about a billion dollars (almost 2 trillion shillings) a year if the country’s oil needs are met from domestic oil supply, freeing much needed foreign exchange, and even of the possibility of Uganda becoming a net oil exporter.

This follows the confirmation Hardman Resources; an Australian drilling company working in conjunction with Tullow Oil from the United Kingdom, that Uganda has the capacity to produce oil to a tune of 10,000 barrels per day.

The world’s current oil consumption stands at 80 million barrels of oil per day having gone up from 65 million barrels per day (bpd) over the last five years. This jump in demand is a result of China and India’s rising demand of oil. Locally, Uganda’s demand for oil products is also rising at a rate of 6 % per day. Last year, Uganda consumed 700,000 cm of petroleum products worth $250 million. Per day, the country’s fuel needs stand at 50,000 cm (1,000 litres make up 1 cm). Per capita consumption of petroleum in Uganda has grown from 16 litres in 1991 to 24 litres at end of 2004 and that figure must be higher now.

At the cost of $70 (about 125, 000 shillings) a barrel, the average current price, 4,200 barrels a day from Waraga 1 would generate about $294,000 (Shs 546m) a day and Shs 199.5 bn annually just from one well.

Eritrea.

Eritrea is Africa’s youngest nation, having gained its independence from Ethiopia in 1993. It lies to the north of Ethiopia and forms part of the North East African Region.  The two-year war between Eritrea and Ethiopia that began in 1998 has badly affected Eritrea’s economy, as Ethiopia was one of Eritrea’s major trading partners.

Eritrean mining and oil resources might soon become key elements of the countries economy. Two mining companies, Nevsun Resources and Chalice Gold, have announced to start within the next two years gold production in the Red Sea State. This will add Eritrea to the list of mineral exporting countries in Africa. Several other companies such as Sunridge Gold Corp. and South Boulder Mines  have also projects and mining assets in Eritrea.

Oil resources in Eritrea are believed to be substantial although there is little information available in this regard. In 2008 the Government of Eritrea signed two agreements with Defba Oil Share Company on oil exploration and development. The company is supposed to undertake oil exploration activities in two blocks of the Eritrean northern territorial waters.  The Defba Oil Share Company has been set up through the partnership of the Eritrean government and Energy Alliance Company W.L.L.

Hydrocarbon exploration, primarily offshore in the Red Sea, began in the 1960’s when Eritrea was still federated with Ethiopia. In 1995, Eritrea signed a production sharing contract (PSC) with U.S.-based Anadarko Petroleum (Anadarko) for the offshore Zula Block. Anadarko signed a second PSC for the offshore Edd Block, located south of the Zula Block, in September 1997.

Anadarko announced, in December 1997, that it had reached an agreement with ENI/Agip (Agip) to swap interests in exploration acreage. Anadarko received a 25% interest in a Tunisian block operated by Agip, and Agip received a 30% share in the 6.7-million acre Zula Block and 30% interest in the Edd Block. Burlington Resources, a U.S.-based independent, later joined the consortium by acquiring a 20% interest in both acreages. Anadarko’s first two exploration wells, both drilled on the Zula Block, were unsuccessful. In January 1999, a third dry well, Edd-1 on the Edd Block, was drilled. Citing the disappointing exploration results, Anadarko and its partners ceased exploration activities and relinquished their rights to the offshore blocks.

Ethiopia.

Ethiopia is endowed with energy resources such as coal, biomass, solar energy and natural gas and is not a great consumer of petroleum fuels. Current natural gas reserves are estimated to be 24 million cubic meters.

Just recently Ethiopia signed an oil exploration agreement for petroleum onshore development in the Ogaden Basin with Sweden- based Lundin East Africa Bv. There are in total 11 foreign companies exploring Oil in Ethiopia including Africa Oil Corporation, South West Energy and Malaysia’s state-owned Petronas. The Ethiopian government has announced that it will offer further 14 licences for oil and gas exploration over a period of three years starting from 2009.

In June 2003, the Ethiopian government signed an oil exploration deal with Malaysian company Petronas for 5,800 square mile tract in Gambela, in the far western part of the country. The region is closely related the Sudan oil fields. Petronas has committed to investing in regional infrastructure, employing local staff, improving health services, and developing the skills of the ministry of Mines. Petronas is also interested in natural gas exploration in Ogadenia region.

Ethiopia is totally reliant on imports to meet its petroleum requirements. Some petroleum imports are received at the port of Djibouti, and shipped via rail and tanker truck to Ethiopia. With the recent development of oil in Sudan, however, Ethiopia has begun importing oil which, under COMESA, is not subject to tariffs. Oil imports from Sudan began in January 2003 transported by tanker trucks along a new road between the two countries.

Petronas, is going to drill three oil exploration wells in Ethiopia’s Ogaden basin. They have hired a Dubai-based exploration company to replace China’s Zhonguyuan Petroleum Exploration Bureau, which refuses to go back to the region, after the Ogaden National Liberation Front, an ethnic Somali separatist group, attacked a Chinese-run exploration site, killing 65 Ethiopian and nine Chinese.

Uganda

By Olad Hassan

The Cranes of Uganda, defending Cecafa Champions, have again retained their regional tittle and 11th cecafa Senior challenge after beating Rwanda in the final of the tournament on sunday.

Dam Wagaluka opened the scoring deadlock of the final for Uganda 4 minuts before the half time and Emmanuel Okwi scored an other fantastic goal for uganda in the 73rd minuts, to give the win of cecafa in their consecutive two years.

Less than 5,000 fans have attended to watch the regional final, that looked poor attendence of a such high profile game of the region,this came after the hosts Harambee stars eleminated from the competition in the quarter final stage.

Uganda are considered to be the best team in the region, cranes have reached 15 finals of the Cecafa cup winning 11 of them.

Ugandan Scotish coach Bobby Williamson told the media after the game, that his player played their best and he that he was already expecting to win the cup.

Earlier Zanzibar defeated mainland Tanzania 1-nil to finish third in the regional competition.

Concerned about the serious threat posed by drug trafficking to global security, particularly in Africa, the Security Council yesterday called on the international community to strengthen its cooperation with the United Nations and regional organizations in fighting the scourge.

In a statement read out by Bedouma Alain Yoda, Minister for Foreign Affairs of Burkina Faso, which holds the Council presidency for December, the Council recognized the anti-drug-trafficking measures undertaken by a range of United Nations bodies, from the General Assembly to the United Nations Office on Drugs and Crime (UNODC), and encouraged them to take further action.

The Council also encouraged States to comply with their obligations to combat drug trafficking, to accede to relevant conventions and to investigate and prosecute those involved. It invited the Secretary-General to consider integrating the anti-drug-trafficking fight into conflict prevention strategies, conflict analysis and integrated mission assessments, as well as planning and peacebuilding support.

“Those who run trafficking operations are ruthless and often murderous,” United Nations Secretary-General Ban Ki-moon said as he helped open a discussion of the problem following the Council’s adoption of the presidential statement. “We must pursue them and thwart them with the full force of the law and international resolve.”

He said the framework for international cooperation was being built around strong, United Nations-backed legal instruments, with the assistance of UNODC and other organizations. However, not all States had become parties to the instruments and they needed to be implemented more effectively. “So far, cooperation between Governments is lagging behind cooperation between organized crime networks,” he said. To counter the global threat, States must share more intelligence, carry out more joint operations, build capacity, and provide mutual legal assistance, he stressed.

Briefing the Council after the Secretary-General’s remarks, UNODC Executive Director Antonio Maria Costa said there were new, worrisome developments concerning drugs in both West and East Africa, as well as across the sub-Saharan land mass. The continent was facing a severe and complex drug problem – not only trafficking but also production and consumption. Serious consequences in terms of health, development and security were inevitable.

He said the recent discovery of laboratories in Guinea showed that West Africa was also becoming a producer of synthetic drugs (amphetamines) and of crystal cocaine refined from pasta basica.

In East Africa, 30-35 tons of Afghan heroin were being imported, causing a dramatic increase in heroin addiction and spreading HIV/AIDS in the slums of Nairobi and Mombasa, Kenya’s two main cities.

The two streams of illicit drugs flowing into East and West Africa were now meeting in the Sahara, creating new trafficking routes of unprecedented scale across Chad, Niger and Mali he said.

Drugs were enriching not only organized crime but also terrorists and other anti-Government forces, he warned. To counter that threat, national capacity must be strengthened and information-sharing among affected countries promoted. In addition, he urged the creation of a Trans-Saharan Crime Monitoring Network to improve information, monitor suspicious activity, exchange evidence, facilitate legal cooperation and strengthen regional efforts.

In the ensuing debate, speakers welcomed UNODC’s efforts and called for a greater focus, as well as a more comprehensive framework of international cooperation, for fighting illicit drug trafficking in Africa and around the world. Many also described the extent of the problem in their own subregions, emphasizing the need not only to reduce supply, but also demand.

Most speakers called on the Security Council to pay more attention to the issue from the peace and security perspective. However, Venezuela’s representative said drug trafficking did not fall under the 15-member body’s jurisdiction and must be fought in a way that gained the approval of the entire international community, through United Nations units that reported to the General Assembly.

Austria’s Vice-Minister for European and International Affairs described the results of a donor round table that his country had co-hosted last week, with a view to increasing support for the Regional Action Plan on illicit drug trafficking and organized crime of the Economic Community of West African States (ECOWAS).

UIA

In the period July to September 2009, the authority licensed 104 projects worth $265,765,528.

Out of the 104, 58 projects owned by Ugandans, 14 are owned by Indians while 37 are from 13 other countries. Apart from jobs, the country ill benefit from taxation and social infrastructure if the companies develop friendly social responsibility policies.

Major investors are from India, United Kingdom, China, Nigeria, Russia, Kenya, Virgin Islands, Sudan, Eritrea and Lebanon.

The major sector in attracting investment is the manufacturing sector that has attracted 36 projects with a planned investment of $93.4 million and is expected to create 4001 jobs, according to a quarterly released by the Uganda Investment Authority last week.

“The manufacturing sector continues to attract more investments and to create the urgently needed jobs for the Ugandans,” said the UIA Executive Director Dr. Maggie Kigozi.

She said some of these projects take off immediately while others delay because they have to carry out Environmental Impact Assessments (EIA) and others delay due problems in sourcing funds.

She said this is in line with the government’s strategy to create jobs and adding value to the agro-products and other raw resources.

“The steady increase in the manufacturing set ups is in response to the regional demand for Uganda’s edible oils, maize flour, and other food stuffs, dairy products, plastics utensils, from Uganda’s surrounding markets of Rwanda, DCR Congo and Sudan,” she said.

UIA Board Chairman Patrick Bitature said the authority is on course with the establishment of the 22 industrial parks as per the 2009/2010 budget with an objective of intensifying the drive to add value to Ugandan products and eradicate poverty through the provision of incomes.

He said the Kampala Industrial and Business Park (KIBP) located at Namanve on Jinja road, 10 kilometres East of Kampala is being implemented on a fast track arrangement.

This is a $150 million World Bank project that is also expected to create over 5000 jobs when industrialists start using it.

“Most of the earthworks that include construction of a road network to sub-grade level have been completed,” he said.

The authority also procured 70 acres of land for establishment of the an industrial park at Luzira, a Kampala suburb and factory construction by the beneficiaries is going on.He said the master plan for another 50 acres in Bweyogerere another Kampala suburb has been prepared and approved by the National Industrial Park Planning Committee.

The authority has also acquired 12 acres for the small and medium scale (SME) industrial park and is in the process of acquiring 640 acres of land in Western region town of Mbarara. Foreign Direct Investment in Uganda has grown significantly over the years and Uganda is set to draw in a lot more foreign investors courtesy of the young oil and gas sector that is just getting off the ground.

Phaunos Timber

The Phaunos Timber Fund (AIM: PTF) announced that it has increased its stake in Norwegian company Green Resource AS, invesring a further US$2.36m in the privately owned company. The deal is the third of similar transactions and it takes fund’s total investment in Green Resources, including loans, to approximately $35m.

Phaunos Timber Fund is a closed ended investment company which aims to achieve long term returns through a diversified portfolio of timberland and timber-related investments. FourWinds Capital Management is the appointed investment manager of the company.

Green Resources manages over 14,300 hectares of timberland in East Africa, including forests in Tanzania, Uganda and Mozambique. Green Resources’ industrial operation, Sao Hill Industries (SHI), is East Africa’s largest sawmill and one of the largest transmission pole producers in the region.

There have been many positive developments in recent months at Green Resources. Earlier this year it agreed long term borrowing from the Norwegian development financial institution ‘Norfund’ and the IFC subsidiary of the World Bank. Through the agreements, Green Resources raised $25m.

The proceeds from the loans are being used for additional plantation development and for industrial operation improvements in Tanzania. The IFC loan is the largest ever to a private company in Tanzania.

In July, Green Resources’ plantations Mapanda and Uchindile were the first forest projects, outside of the US, to receive Voluntary Carbon validation (VCS). VCS is considered the world standard for voluntary carbon projects.

In August, Green Resources signed a framework agreement with the Government of Mozambique to establish a world scale forest plantation of up to 100,000 ha in Northern Mozambique.

Most recently, Green Resources’ subsidiary SHI signed a 20 year log supply contract with Tanzania’s Department of Forestry and was awarded a large contract with Tanzania Electric Supply Company Limited to provide transmission poles. The majority of these logs will be harvested from Green Resources’ eucalyptus plantations established in the late 1990’s in Uganda and Tanzania. Source: (ProactiveInvestors)

EASBRIG

A standby force for the Eastern Africa region will be ready for operation next year, enabling regional countries to self-resolve their own conflicts, rather than rely on international forces.

According to the Eastern Africa Standby Brigade Coordination Mechanism the East African stand by force (EASF) will go operational in November 2010 after the Standby Brigade, which currently is in field training, meets the requirements set by the African Union.

The Brigade which will involve specially trained troops from 11 member countries will complete its field training in November after which it will be certified as fully operational.

The director of the East African Standby Brigade Co-coordinating Mechanism (EASBCOM) Simon Mulongo said.

Accordingly, Countries in East Africa and the Horn will soon be obligated to intervene in trouble-spots like Somalia and Darfur, instead of relying on help from the entire continent, the United Nations or European Union.

Mr Mulongo said the priority areas for intervention will depend on three factors: The most deserving conflict situation; the voting by the AU peace and Security Council; and a decision by the regional summit.

The stand-by force was established in 2007 by defense ministers from across the region. Its formation marked the sixth such force to the African continent.

Up on deployment EASF, will be used in peacekeeping missions as well as in respond to national emergencies. Member countries that originally signed for EASF were 13 countries .

They are Kenya, Ethiopia, Uganda, Sudan, Rwanda, Mauritius, Madagascar, Eritrea, Djibouti, Seychelles, Somalia and Tanzania. Military commanders from the Horn of Africa and the Great Lakes region recently met in Nairobi for a one-week conference that analyzed conflicts and disasters in the region, and how to respond to them as a region. Source: (SudanTribue)

African Farm

COMESA announced the creation of the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA), which should help farmers to address their problems during rough times.

During the second congress of the East African Farmers’ Federation (EAFF) in Arusha, Tanzania the creation of  ACTESA was hailed as the most significant development in regional agriculture in 2009.

The EAFF highlights that farmers in the region have long required a focused initiative that would comprehensively address their market development needs.

“We need markets as producers but sometimes when our crops fail we need support – we see ACTESA as designed to meet these challenges.  We welcome ACTESA and we will work with it all the way,” the EAFF president stated.

The 2nd EAFF Congress was officially opened by Tanzanian Deputy Minister for East African Cooperation Honourable Mohamed Aboud, and the Congress brought together over 200 representatives of farmers’ organizations in the East African region to map strategies for the agricultural sector in East Africa over the next 2 years.

Newly appointed ACTESA Chief Executive Officer Cris Muyunda, during his address to the congress highlighted that ACTESA priorities over the next year included capacity building of farmer organizations, promoting of sustainable public – private partnerships in input supply and crop marketing and supporting modern instruments in structured agricultural trade. 

Other dignitaries at the Congress included ASARECA Executive Director Seyfu Ketema, and senior officials of the International Livestock Research Institute (ILRI).

In its resolutions, the congress urged COMESA, EAC and Member States to put in place a strong early warning mechanism for potential food shortfalls in the region, carefully examine the tax regime affecting agriculture in the region, fully consult farmers before concluding international trade agreements and deal with all security issues affecting farmers in the region, particularly those in the DRC.

Robert Wood, Deputy Spokesman of the US Department State said during a press briefing that food security is a priority to Secretary Clinton.

Asked what America plans to do on the worsening food situation in East Africa Mr Wood replied that the matter is of big concern to the United States.

He explained that the US is trying to provide resources not only direct on a bilateral level, but also by supporting international organizations.

The spokesman points out that it will take more than resources from the United States to address the problem. He calls for the assistance of other nations in order to deal with the serious food security problem in Africa.

Chinese News Agency Xinhua reports that Chinese Ambassador to Eritrea Shu Zhan is expecting trade and cultural relations with Eritrea to be strengthened further. Shu points out that China has already aided a hospital, two schools and one  human and social science institute to Eritrea and that trade volumes of China with Eritrea have reached $31 Million in 2008, which was a 7.6% increase compared to 2007.

The statements of the Ambassador follow previous steps taken by China and African countries to improve bilateral trade relations. For example, in August 2008 the China Development Bank signed a credit agreement worth $50 Million with PTA Bank, which stands for Eastern and Southern African Development Bank. The shareholders of the PTA Bank  are Eritrea, Burundi, Comoros, Rwanda, Seychelles, Somalia, Ethiopia, Egypt, Djibouti, Kenya, Tanzania, Seychelles,  Somalia, Sudan, Uganda, Zambia, Zimbabwe. The credit was supposed to support industrial sectors, which require heavy investment such as mining, telecommunication and infrastructure and was a result of the Bejing Summit  of the Forum on China-Africa Cooperation in 2006. China is also involved in the gold mining projects in Eritrea with companies such as Donia Resources & Co (capitaleritrea).

Two Women from South Africa are being tested on possible infections with the swine flu virus.  The results could take some time as the samples have to be sent overseas for analysis.  According to the AU health inspections have been set up at East African ports in order to prevent the virus to enter Africa. Read more The BBC.