International Companies Compete over East Africa’s Natural Gas

on Aug 21, 2012

For the past fifty years international oil companies have been drilling all around the globe in their search for undiscovered natural resources. About 18 companies are presently committed and drilling in some 30 offshore coastal areas in northern Mozambique, southern Tanzania and southern Kenya. The US

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Geological Survey has data of about 441.1 trillion cubic feet (tcf) of available natural gas in East Africa.
Most significant findings are in the deep waters of Tanzania and Mozambique. In 2010-2011, Anadarko (APC: US) found the so-called Prosperidade field offshore Mozambique, which supposedly holds about 30 tcf of gas. Eni also found gas in the same field amounting to 30 tcf as well and further probes show there are potentially 10 tcf more. This means the Prosperidade field may have in total anywhere between 70 to 100 tcf.

The Rovuma discovery has about 60 tcf of natural gas and has been the main reason why Cove Energy (LN: COV) was bought by PTTEP (TB: PTTEP) through a takeover which gave the Thai company 91.37 per cent stake. PTTEP received Cove’s 8.5 per cent share in the joint venture at Rovuma area 1. Other companies include Andarko (operator) with 36.5 per cent, Mitsui with 20 per cent, ENH with 15 per cent, Bharat Petroleum with 10 per cent and Videocon with the rest of 10 per cent interest.

!m[](/uploads/story/283/thumbs/pic1_inline.png)”This success will mark PTTEP’s significant step into the highly prospective East Africa hydrocarbon region which will be a vital LNG production base in the future in order to support the increasing demand of Asian region including Thailand,” said Tevin Vongvanich, chief executive and president of the Thai company.

Of course, billions of dollars in investments will be required to develop the Rovuma field and to construct the necessary liquefied natural gas terminals from which the gas will be shipped to Asia. It will not be surprising if Shell (RDSA: US) joins the venture at some point as it is the leading LNG company and will not only bring financial “firepower” but will also be able to provide considerable technical expertise.

With soaring labour and shipment costs in Australia, LNG projects are not going too well. Shell has even started talking about possibly delaying its projects. Other companies are turning to East Africa as the best current alternative to invest into, with a view to the longer term. Its huge advantage is its proximity to energy-hungry Asian states.
There will be positives for the East African region as a whole. Extraction companies working in Tanzania must donate $100,000 a year as a registration fee and Tanzania’s government, after learning its lesson from the gold miners, will be asking for 60 per cent of all gas revenues.
The new pipelines will most probably open up jobs for the local population and according to Samuel Bastos de Miranda, Petrobas’ Managing Director, Tanzania’s social and economic sectors will be greatly improved. “We will give employment opportunity to Tanzanians. To date, Petrobras has employed about 40 Tanzanians in fields of law, accounting, engineering, procurement and human resources.”
The rush is spreading and becoming more and more competitive with companies seeking to capitalize on unexplored opportunities. There is a growing need for more transparency and regulation of all agreements signed between the East African countries and the international oil companies if the industry is to provide maximum value to all parties. The East African countries adopting a common and unified approach of dealing with their natural resources, many costs, such as infrastructure and logistics, will be reduced to the benefit of everyone.


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