Kenya to host East Africa energy conference

A major investment conference is slated for Nairobi following recent oil, gas and coal discoveries in Kenya.

The conference for East African decision makers is meant to engage international and local investors in examining the investments opportunities in the region.

Energy minister Kiraitu Murungi will host his counterparts from South Sudan, Uganda, Tanzania and Mozambique at the Ministers’ Official East Africa Oil and Gas Summit from November 13 to November 14.

With attendance by the ministers and senior oil and gas industry representatives from the region, the Summit is billed as the main annual international hub for the energy industry across East Africa.

Mr Murungi said: “The summit will unite regional and international investors and industry experts to share their knowledge and explore the current challenges and opportunities. It comes at a perfect time when the world's eyes are turning towards our region.”

Mr Murungi said these are extremely exciting times for the oil and gas sector throughout East Africa, both in terms of realisation of recent discoveries and also the huge potential that the region has to offer.

The minister said the summit is the first in what will become a pivotal annual event of great investor and stakeholder interest.

“It is open to both the regional and international oil and gas communities and we are very keen to learn from the best practices around the world to guide this nascent oil exploitation and production business,” said Mr Murungi. “We are looking at countries like Abu Dhabi, Norway and Ghana which have managed their oil resources fairly well as examples. However, we want to make Kenya a case study of the best management of oil in the world.”

Tullow oil who were behind the successful oil discovery in Turkana County early this year, lead a long list of firms which have signed up to bring in delegates to the conference.

With more than 100 companies represented by senior figures, company delegations are led by National Oil Corporation Kenya, Tullow, Petrobras, Halliburton, Shell, Exxon, Africa Oil Corp, Anadarko, Weatherford, Fugro, Total SA, Afren, Chase Bank, Camac Energy, Bertling, Ernst & Young, CCC, Imara Energy, Alpha Marine, Alba Petroleum, Simba, Nilepet, Ophir, Heritage and Yokagawa.

Ministers who have confirmed attendance are Mr Stephen Dhieu Dau (Minister for Petroleum and Mining, South Sudan); Ms Irene Muloni (Minister of Energy & Minerals, Uganda) and Mr Abdul Razak Noormahomed (Vice-Minister, Ministry for Mineral Resources Mozambique).

Sponsors for the summit include NOC Kenya, Africa Oil Corp, Simba Energy, Bertling Logistics, Newport Africa and Hybrid Solutions.

South Africa aims to cash in on East Africa energy boom

South Africa's budding energy service industry is aiming to reap the benefits of new natural gas and oil finds along Africa's east coast, where geographical proximity gives it the edge over other hubs in Europe, Singapore and Dubai.

Located at the foot of Africa along a major shipping route, South Africa is well placed to take advantage of increased exploration by global energy companies in East Africa, where large gas discoveries over the past year have excited global interest.

The US Geological Survey estimates that more than 250 trillion cubic feet of natural gas may lie off Kenya, Tanzania and Mozambique, and discoveries announced this year may hold enough gas to supply major European economies for at least one year.

South Africa, the continent's largest economy, views its ship and oil rig repair industry as a potential niche market that could, conservatively, triple its annual revenue to 3 billion rand ($363 million) by 2015 and create 3,000 jobs.

"Our real competitive advantage lies in our proximity to the action," said Warwick Blyth, chief executive at the South African Oil and Gas Alliance (SAOGA), the industry body.

"If you need a piece of kit brought down, a motor rewound or a rig sorted out without taking an extra month of towing, then it's usually brought here," he told Reuters on Friday.

Cape Town is considered a leading logistics and service hub for oil operators in Nigeria, Africa's top oil producer on the continent's west coast.

Blyth said that projected repair savings for rig operators in Africa can be massive considering the time costs associated with towing a rig to Singapore, which could take up to 100 days for a rig that rents out at $500,000 a day.

Mozambique activity

DCD Marine, which operates Cape Town harbour's dedicated rig repair berth, said that its clients include all the large drill-ship and rig operators working on Africa's east and west coasts, such as Transocean and Halliburton.

"DCD Marine expects an uptake in business as more rigs and ships are coming offshore Mozambique to exploit gas finds in the area," said Gerry Klos, the company's general manager.

Cape Town and Saldanha Bay, where MAN Ferrostaal's oil and gas shipyard was largely idle since being built in 2007, has experienced a steady increase in business over the past 18 months.

"Right now we are exceptionally busy. We've had three to four projects going simultaneously; big projects in the order of about 200 million rand each," Blyth said.

However, South Africa's government says that resolving critical customs and excise issues related to storing and moving oil and gas equipment in and out of Africa is vital for the local service industry to grow.

A lack of capacity and investment at ports is another challenge, said Blyth, adding that a proposed one billion rand Saldanha Bay quay for deep sea oil rigs would help to maintain the double-digit annual growth rates the industry needs. ($1 = 8.2612 South African rand)

The African Commission on Nuclear Energy Convenes its Second Meeting

The African Commission on Nuclear Energy (AFCONE), established within the framework of the African Nuclear Weapon?Free?Zone Treaty, also known as the Treaty of Pelindaba, held today, at the African Union (AU) Headquarters, in Addis Ababa, its second ordinary session, to finalize and adopt key documents required for its early and full operationalization. The first ordinary session of AFCONE took place in Addis Ababa, on 4 May 2011.
Today's meeting adopted the rules of procedure, structure, programme of work and budget of AFCONE. The programme of work focusses on the following areas: monitoring of compliance by the State Parties with their non?proliferation obligations; nuclear and radiation safety and security; nuclear sciences and technology; partnership and technical cooperation. Regarding the budget, the meeting agreed to an amount of approximately US $800,000 per year for the period 2012?2014. The meeting also agreed on the scale of assessment for contributions to the budget of AFCONE. The conclusions reached will be submitted to the second Conference of State Parties, scheduled to be held in Addis Ababa, in November 2012.
The meeting provided an opportunity to review and adopt the Terms of Reference of AFCONE Executive Secretary, who is in charge of the day?to?day activities of the Commission. The representatives of the Government South Africa seized the opportunity to provide an update on the steps being taken for the establishment of AFCONE Executive Secretariat, which will be based in Pretoria. The Government of South Africa will provide the required facilities in terms of office space and equipment.
The host agreement is being finalized between the AU Commission and South Africa. The Treaty of Pelindaba, which entered into force on 15 July 2009, establishes Africa as a zone free of nuclear weapons. It mandates AFCONE to monitor compliance by the State Parties with their obligations under the Treaty, as well as to promote the peaceful use of nuclear science and technology in various fields, including health, agriculture, industry and energy.
The meeting was opened by Ambassador Abdul Samad Minty of South Africa, Chairperson of AFCONE, and El?Ghassim Wane, Director of the AU Peace and Security Department. It was attended by eleven of the twelve members of AFCONE, who were elected for a three?year term at the First Conference of States Parties, held in Addis Ababa, on 4 November 2010. The AFCONE Commissioners are from the following countries: Algeria, Burkina Faso, Cameroon, Ethiopia, Kenya, Mali, Mauritius, Libya, Senegal, South Africa, Togo and Tunisia.
Before the meeting, the Chairperson of AFCONE met with the AU Commissioner for Peace and Security, Amb. Ramtane Lamamra, to exchange views on the efforts to fully operationalize AFCONE and on the overall implementation process of the Treaty of Pelindaba.

Ambitious geothermal power plant kicks off

NAIROBI, Kenya, Jul 24 – President Mwai Kibaki on Monday unveiled the construction of the world’s most ambitious power project that will help ensure adequate power supply in the country, while reducing the cost of electricity.

The Olkaria 280 MegaWatt (MW) geothermal project will raise Kenya Electricity Generating Company’s (KenGen) total electricity capacity by 25 percent which President Kibaki noted will significantly raise geothermal contribution by the country’s largest power producer to help meet the power demand.

“I am happy to note that this project begins the shift from hydro based electricity to a geothermal based power future,” he said.

“Unlike hydro generation that is at times affected by vagaries of weather forcing us to rely on expensive modes of generation, geothermal is affordable, stable, renewable and clean,” he explained.

Kenya’s power generation, largely dominated by water-powered turbines, is gradually seeking to shift the more dependable geothermal and wind powered plants due to the effects of climate change, which has sparked off ecological damage.

Once the Olkaria I and IV geothermal power development facilities are completed in 2014, Kenya will be on the global geothermal map as it will be the world’s single biggest project in terms of power output.

It will also bring the country closer to claiming one of the top positions in terms of global geothermal output, which is led by the United States at 3,000MW and Philippines at 2,000MW.

Kenya is seeking to generate at least 5,000MW from its vast geothermal resource by 2030, and KenGen revealed that it will soon start generation of 65MW from geothermal using the mobile geothermal wellhead, a new technology introduced from Iceland.

President Kibaki acknowledged that the government cannot single handedly raise the resources need for geothermal power exploration and development.

“We have put in place a conducive legal and fiscal framework to attract private sector participation in harnessing our robust geothermal resources,” he stated.

KenGen drills the wells and rents the steam to private companies who can bring in overhead generators to tap the steam, generate electricity and connect to the national grid.

Kenya has feed-in tariffs that encourage investors to participate in electricity generation projects.

“Our work is to offer investors a risk-free alternative by providing them with ready steam. All they need to do is to construct power plants and produce electricity,” KenGen CEO Eddy Njoroge said.

The project’s total cost will be $981 million (Sh82.6 trillion) which is financed by KenGen, the Government of Kenya, World Bank, German Development Bank KfW, European Investment Bank, French development finance institution AFD and the Japan International Cooperation Agency.

The project will pump an additional 280MW of electricity to the national grid and Njoroge said the project will be a game changer by raising the amount of electricity generated from geothermal sources from 155MW to 435MW.

He said that steam wells for the project have already been successfully drilled with well head generators expected to be installed and generate power as plant construction continues.

“Whereas upfront costs may be higher initially, running and maintenance costs of geothermal plants are low and hence the model holds real promise of affordable power in the country,” he said.

“This project will firmly put Kenya on the path to Vision 2030, since affordable, reliable and adequate power are key to the attainment of this economic blueprint,” he added.

The project has been divided into four parts to ease financing and implementation.

Steam field development will be carried out by Sinopec of China, the power plant will be built by a consortium of Toyota Tshusho of Japan and Hundyai of South Korea, transmission lines and the substation will be undertaken by Kamani Engineering Corporation of India, while Sinclair Knight Mertz of New Zealand is in charge of the project consultancy.

Kenya has an immense potential of geothermal resources and KenGen’s strategic plan has identified geothermal based electricity as the best option for the future thanks to its stability, renewable nature and affordability in the long run.

In addition to geothermal resources, the country has recently discovered commercial coal deposits and received encouraging oil exploration results, and President Kibaki expressed his disappointment by the nature of local politics taking place in areas where resources have been found.

“I would like to remind all Kenyans that natural resources in all parts of the country belong to all Kenyans and not just the residents of those particular areas,” he emphasised.

“The State is the custodian of these resources and our new constitution guarantees the equitable sharing of the accruing benefits from these activities,” he added.

The Kenyan government has so far invested $329 million (Sh27.7 trillion) in the geothermal drilling as part of efforts to increase generation to displace the expensive thermal generation.

The investment includes financing to the Geothermal Development Company (GDC) that has announced 2014 deadline for the completion of 120 wells expected to help the country produce an additional 400 MW of electricity at the current drilling site of Menengai near Nakuru Town.

The GDC was formed in 2009 by the government to accelerate the exploration and drilling of the vast geothermal resource along Kenya’s Rift Valley to enable the country to increase the pace of benefiting from cheaper renewable energy.

Studies by Maanvit Consortium of Iceland have confirmed even more untapped geothermal resources at the Olkaria complex, capable of generating an additional 560MW of electricity.

The geothermal plant is also expected to increase the role played by the clean energy in Kenya’s energy mix increasing production from geothermal to 35 percent from the current percent.

The project will complement other efforts by the geothermal development corporation which is selling steam to independent power producers and has a target of 20 drilling steam wells with a potential to generate 400MW at the Menengai block also by 2014.

Total ventures into offshore Kenya

Total has made a major play off East Africa as it snapped up a huge chunk in five Kenyan offshore blocks.

The French supermajor has hatched farm-in agreements with US stalwart Anadarko and London-listed independent Cove Enervy for the quintet of blocks in the Lamu basin, it announced on Wednesday.

The deal for a 40% cut in the blocks follows reports early last month that Total was eyeing acreage in Kenya although it was unclear if this would be on shore or offshore.

Total is taking 20% of Anadarko's share in blocks L5, L7, L11a, L11b and L12 although the latter will stay on as operator with a 50% share. The French player is also getting its hands on 5% of Cove's holding in the blocks with Cove holding on to a 10% cut.

The agreement sees Dynamic Global Advisors sell out its entire 15% stake in the blocks to Total, however.

The blocks cover a total area of 30,500 square kilometres with water depths ranging from 100 to 3000 metres. A 3D seismic survey programme is currently underway.

No purchase price was revealed but Cove said drilling operations are set to kick off in the second half of next year.

Total's senior vice president for exploration, Marc Blaizot, commented: “This transaction is part of a bold exploration strategy that consists in acquiring large stakes in high-potential frontier plays.

"Recent discoveries in offshore Mozambique and Tanzania offer a very promising outlook for these Kenyan permits.”

Last month news wire Dow Jones reported that Total had shown an early interest in one block in Kenya. The report cited Kenyan petroleum official, Martin Heya, as saying Total Kenya Limited was in contact with the government in May with regards to acreage.

Kenya represents a new frontier in oil and gas exploration as the country does not currently produce any oil.

Total has been active in East Africa recently after being awarded oil and gas exploration rights in neighbouring Tanzania last month. Total beat off competition from nine other bidders for the acreage on the northern side of Lake Tanganyika.

The Tanzania Petroleum Development Corporation has divided the Tanzanian side of Lake Tanganyika into two blocks, with the southern portion awarded to Australia's Beach Energy in 2008.

China to Lend Tanzania One Billion Dollars for Pipeline

China and Tanzania are to sign a $1.06 billion loan agreement to build a natural gas pipeline from the southern part of the east African country to its commercial capital, a Tanzanian newspaper wrote.It is hoped the project will put an end to the country's chronic energy shortage.Last month, Energy and Minerals Minister William Ngeleja said in a presentation to parliament that the government was seeking loans from China to finance construction of the pipeline from Mtwara to Dar es Salaam.

The Guardian on Sunday newspaper reported $300 million of the loan will be used to construct processing plants at Mnazi Bay, and that Finance Minister Mustafa Mkulo and Ngeleja were expected to fly to Beijing next week to sign the loan agreement.

Must project

"This is a must project for the future of this country ... we have secured financing from the Chinese and the agreement will be signed next week," Ngeleja was quoted saying.

"Some people have been misleading the public by saying the Chinese own this project, but the truth is it's government owned ... The Chinese are financiers and the project will boost gas supply as well as reducing or ending the power supply problem in the country."

Tanzania's chronic energy shortages have resulted in rolling power outages, undermining economic growth in the country.

Away from hydropower

The Tanzanian government said it plans to shift its focus to investment in thermal plants fuelled by natural gas and coal in attempts at weaning itself off weather-dependent hydropower, which accounts for 55 percent of the country's energy sources.

The paper reported the project will be carried out by the China Petroleum and Technology Development Company (CPTDC) a unit of China National Petroleum Corp (CNPC) , and state-run Tanzania Petroleum Development Corporation.

Aminex Takes over Ruvuma Basin

London-listed Aminex has taken over operatorship of Tanzania’s Ruvuma basin permit in a reshuffling of licence interests ahead of drilling of a key exploration well later this year.

Previous operator Tullow Oil has handed over the reins with immediate effect to Aminex as the partners on the Ruvuma production sharing agreement prepare to spud the Ntorya-1 well in the Mtwara block at the underexplored play in November.

Following a re-assignment of interests by Tullow to partners, Aminex will hold a 56.25% interest with Tullow on 25% and remaining stakeholder Solo on 18.75%. The stake transfers remain subject to Tanzanian government approval.

Aminex said the transfer of operatorship was “a logical and practical move” given that it is already operating a well using the Caroll Rig-6 that will be moved to the drill the Ruvuma well once its present drilling job at Nyuni-2 is completed.

Ntorya-1 is a follow-up to the Likonde-1 well drilled last year that provided strong evidence of oil and gas but was not a commercial discovery.

The new probe will be drilled south of Likonde to a depth of about 2020 metres with drilling expected to take 25 days to reach target depth.

“Both Solo and Aminex have a strong focus on Tanzania and by gaining a greater participation in the PSA will jointly be able to advance the work programme more quickly,” said Solo executive director Neil Ritson.

Aminex chairman Brian Hall said the Ntorya prospect is “in one of the last major underexplored deltaic basins in Africa”.

Aminex was originally awarded the PSA with a 100% interest in 2005 and acquired the original seismic before handing over operatorship to fellow UK independent Tullow.

The Ruvuma basin, located both onshore and offshore Tanzania, has triggered strong exploration interest, with several successful deep-water gas wells drilled by Anadarko in the Mozambique sector of the basin.

Earlier this year, BG Group and partner Ophir Energy drilled an offshore gas discovery in the Tanzanian sector in a licence adjoining the Ruvuma PSA.

Brent Falls Below $111 on US Recession Fears

Brent crude fell below $111 a barrel on Monday, as fears of another U.S. recession slowing fuel demand overshadowed supply concerns over a major shutdown of offshore oil production forced by Tropical Storm Lee.

CNBC.com

U.S. employment growth ground to a halt in August, reviving recession fears and piling pressure on both President Barack Obama and the Federal Reserve to provide more stimulus to aid the frail economy.
   
London Brent crude [LCOCV1  110.50    -1.83  (-1.63%)   ] fell 61 cents to $111.72 a barrel by 0248 GMT, after falling to as low as $111.46 earlier. Brent plunged almost $2 a barrel on Friday on the disappointing jobs data released in the U.S. 
   
U.S. light, sweet crude [CLCV1  84.05    -2.40  (-2.78%)   ] was down 67 cents to $85.78 a barrel, after settling $2.48 lower at $86.45. Friday's oil losses wiped out part of U.S. crude's 4.1 percent gain in the week through Thursday.  
   
"The macro situation is leading to fears of a double-dip recession. And there has been a recent trend of selling into strength when the market hits a soft patch," said Chen Xin Yi, a commodities analyst at Barclays Capital in Singapore. 
   
Asian stocks followed Wall Street lower on Monday, after the U.S. Labor Department said employers added no net new jobs last month and July's total was revised lower.
   
Compounding fears of a recession in the United States, Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt.
   
However, worsening economic woes may also raise the odds of more quantitative easing (QE) by the U.S. Federal Reserve . That could cheapen borrowing, weaken the dollar, and encourage investment in commodities as an asset class.  
   
"This is likely to bring further calls for quantitative easing, despite the Fed's apparent aversion," said CMC Markets market strategist Michael McCarthy in a research note.
   
Brent oil will fall further to $109.01 per barrel, while U.S. oil is also expected to fall more to $84.20 per barrel, according to Reuters market analyst Wang Tao.
 
Storm Watch
   
Providing some support for prices was oil companies' shutdown of more than half the crude production in the U.S. Gulf of Mexico due to Tropical Storm Lee, which is hindering efforts to restaff and restart oil and gas platforms in the basin.
   
Lee reached Louisiana's coast early Sunday, but was moving inland very slowly. Its 45 miles-per-hour (75 kmph) winds grounded helicopters on standby for oil and gas companies that would have otherwise ferried workers out to do post-storm assessments and restaff facilities. 
   
"Reports that about 60 percent of crude refinery capacity was halted while Tropical Storm Lee hit the coast could lead to further declines in crude stockpiles in the latest government inventory report," ANZ Bank said in a research note. 
   
Another storm, Hurricane Katia, intensified over the open Atlantic on Sunday, bulking up to a powerful Category 2 storm, the U.S. National Hurricane Center said.
   
The Miami-based hurricane center said it was still too soon to gauge the potential threat to land or to the U.S. East Coast with any certainty.  
   

But most computer models showed the storm veering on a northeast track out to sea after moving safely west of the mid-Atlantic island of Bermuda later this week.  
     
The European Union imposed a ban on purchases of Syrian oil on Saturday and warned of further steps unless President Bashar al-Assad's government ended its five-month crackdown on dissent.
   
In Libya, forces loyal to Muammar Gaddafi refused on Sunday to give up one of their last strongholds without a fight, raising the prospect of an assault on the town of Bani Walid. 
   
The EU has lifted sanctions on Libyan ports and oil firms, but few expect the country's normal oil production — around 1.6 million bpd — to be restored soon, after a civil war halted its oil sector this year. 

Tanzania watchdog okays BP sale of fuel firm stake

- Tanzania's competition regulator on Friday approved the sale by London-based BP of a 50 percent stake in a fuel marketing business in the east African country to Puma Energy, a subsidiary of Dutch commodity trader Trafigura.

The deal follows an announcement by the oil major in November that it had agreed to sell its southern African network to Trafigura for $296 million, part of a trend that oil majors are exiting fuel retail businesses.

The go-ahead was granted by Tanzania's Fair Competition Commission (FCC) after BP announced it would sell interests in forecourts and supply businesses in Namibia, Botswana, Zambia, Tanzania and Malawi to Puma Energy.

Oil traders such as Trafigura have not historically involved themselves in fuel retail business.

Tanzania's government, which owns the remaining 50 percent stake in BP Tanzania, did not object to the acquisition.

Gulf Power Ltd Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project description The project is the development of an 80 MW Heavy Fuel Oil (“HFO”) diesel power plant, including a 66kv interconnector and backup metering equipment on a 20 years build-own-and-operate basis in the Mombasa Road area of Nairobi, Kenya (the “Project”). The project will have a 20 year Power Purchase Agreement (“PPA”) with Kenya Power and Lighting Company (“KPLC”), the national transmission and distribution company. The developer of the Project is Gulf Power Limited (“GPL” or the “Company”), a special purpose company incorporated in Kenya by a consortium of Kenyan investors with a view to enter the power generation business in Kenya. The Project is one of 3 Independent Power Projects (“IPPs”) for which KPLC had sought Expressions of Interests (“EOI”), in June 2009. These IPPs were expected to generate 60-80 MW each using medium speed diesel engines with HFO as the fuel. The projects were awarded through a competitive bidding process based on the lowest electricity charges. GPL submitted an EOI to bid for the Project. In the final bidding held on December 15, 2009, GPL was the lowest bidder for the development of an 80 MW plant on the Mombasa Road, Athi River Site and on that basis was awarded the concession.

Kenyan firm plans 80 MW diesel plant

 Kenyan firm, Gulf Power, plans to generate 80 megawatts (MW) of power from thermal sources for the national grid.

Several parts of Kenya are experiencing severe drought, which could lead to the use of diesel to generate power as has happened in the past.

Meteorologists are forecasting depressed rainfall within the first six months of 2011.

The east Africa nation relies heavily on hydroelectric dams for power, which have proved inefficient in times of drought.

"The generating system will comprise heavy fuel oil-powered generators capable of generating a net electrical output of 80.32 MW," Gulf Power said in a statement.

The firm said it had applied for a power generation licence from the sector regulator.

Another power generating firm, Iberafrica, said  it would buy 320,000 tonnes of heavy fuel oil for its 110 MW power plant in the capital for use over the next 24 months.

Africa poised to become energy powerhouse

A CONTRIBUTOR | APRIL 2011 | SOURCE: The Citizen

Africa could hold the key to solving the world’s looming energy crisis but unlocking the continent’s vast potential will not be easy.

As supplies of oil and gas from traditional sources diminish, international energy companies are pushing into increasingly volatile and environmentally-sensitive territory in their scramble to meet demand.

• 
•  

Among the most controversial projects on the starting blocks for 2011 are a proposed $17 billion development of the world’s third largest hydroelectric dam in the Amazon rainforest and the possibility of drilling in Alaska’s Arctic Refuge.

But it is in Africa that many believe the most potential lies for boosting energy supplies. Over the next two decades, 90 per cent of new resource development in oil and gas will be in the developing world, and much of that in Africa.

Industry experts are asking whether Africa’s transformation into an energy powerhouse could offer an answer to the energy conundrum – both as an oil producer and a testing ground for large-scale clean energy. But potential investors need also to be aware of the risks.

Africa already accounts for 10 per cent of the world’s oil supplies but a second generation of oil production has emerged in the last three years, most recently off Ghana’s coast. This has been spurred in part by rapid advances in drilling technology which have prized open new reserves.

"Everyone knew the Guinea basin was a very rich deposit for hydrocarbons, but until recently all the attention focused on a small group of countries that were seen as worthwhile investments,” says Philippe de Pontet, an analyst at political risk consultant Eurasia Group, adding: “ [But today] even countries that were totally off the radar are getting a fresh look.”

Compared to Middle East crude, African oil has many advantages. It is light and low in sulfur – a quality highly prized by refiners – it is located primarily offshore and favorable production sharing agreements are readily available.

“With the decline in production [of this kind of oil] in Europe, there should be a constant demand for crude from Africa in the future,” says Olivier Jakob, an analyst at Petromatrix.

While some of the biggest finds have been in Uganda and Ghana, Sebastian Spio-Garbrah, founder of risk consultant Da Mina Advisors, says that exploration off the shore of Kenya and in Tanzania and South Sudan is the most crucial for the Asian market, due to lower shipping costs. “There you have the real prospect that exploration... could rise dramatically.” However, concerns remain over the environmental impact of so many large-scale energy projects in developing countries.

“There’s certainly more talk of environmental protection,” says Julian Lee, an analyst at the Center for Global Energy Studies. “It’s not clear whether this will translate into regulation on the ground, but it will become much more important. Companies have fewer places to hide these days and are closely scrutinized by NGOs, if not governments.

Regulation is no silver bullet in Africa, but it is hoped it could help pen a new chapter for African oil.

According to Mr de Pontet, the Gulf of Mexico Spill acted as a wake-up call for governments in relation to the tourism, fishing and farming industries. “Even in Angola the government is looking to enforce tougher regulations for offshore drilling. The BP spill gave additional momentum,” he says.

Not only is Africa rich in natural gas and oil, but the continent also has plenty of sunshine, strong winds, countless powerful river systems and hydroelectric dams. Africa’s electricity supply continues to depend heavily on carbon-based energy sources, but an increasing number of governments are looking at the potential of wind turbines, solar panels and other forms of cleaner energy.

Opportunity for development in renewable energy in Africa is huge, with the potential to draw in foreign investment as well as funding from the World Bank’s Clean Technology Fund to spearhead a green revolution. (Agencies)

Energy experts believe renewable technologies could even allow poor communities without electricity to leapfrog the West’s high-carbon technology, in the same way mobile phones jumped over landline technology in many developing African countries. At the end of 2008, Africa’s installed wind power capacity was just 593 megawatts, but by the end of last year it was just under one gigawatt (1000 megawatts).

African Oil Supply – Taking Stock

CGES  | SOURCE: Quarterly Oil Supply

Oil production from the non-OPEC countries of the continent of Africa was much lower than expected in 2008.

Output fell by around 40,000 bpd instead of rising by 120-140,000 bpd, as predicted by the CGES and most other forecasters, including the IEA and OPEC. This year, however, the CGES expects oil production in non-OPEC Africa to rise by 85,000 bpd.

• 
•  

The biggest disappointment was Congo (Brazzaville), where output was expected to rise sharply as Total’s 65,000-bpd N’Kossa field came back on stream after a fire in May 2007 and Total’s 90,000-bpd Moho Bilondo deepwater offshore oil field started up.

However, detailed monthly data for Congolese oil production, published by the Energy Industries Transparency Initiative (EITI), show that output of oil liquids (crude, LPG & NGLs) averaged only 237,000 bpd in 2008 — significantly lower than most analysts had assumed but up 13,000 bpd on the 2007 figure.

Although Moho Bilondo came on stream in April 2008, a month ahead of schedule, output only reached 34,000 bpd by the end of last year, limiting its contribution to the annual average.

Production wells are still being drilled and the field is not expected to reach capacity until 2010. Output from Congo (Brazzaville) is expected to increase again this year as output continues to rise from Moho Bilondo, but the gains will be limited by lower output from existing mature fields, which are declining at around 10% according to the EITI data.

Sudanese Oil

Oil production in the Sudan was also lower than predicted, averaging only 462,000 bpd in 2008 — down 22,000 bpd on the previous year. The Sudan had hoped to maintain its output close to 500,000 bpd last year following the completion of the Dar Blend export terminal, but rising production of Dar Blend from Blocks 3 & 7 was more than offset by a sharp fall in the supply of Nile Blend, which averaged 205,000 bpd in 2008, down 40,000 bpd (17%) on the year before. Yet despite this setback, the Sudan’s oil production is expected to recover in 2009.

The 50,000-bpd Gumri field started up in January, lifting the supply of Dar Blend and another 50,000-bpd field, Qamari, is also expected to start up this year. The Sudan hopes to raise Dar Blend output to 300,000 bpd by the end of 2009, but this may be optimistic, since last year’s 275,000-bpd target was not achieved: output of Dar Blend averaged 199,000 bpd in 2009, up 24,000 bpd on the previous year.

The CGES expects the Sudan’s oil production to average 500,000 bpd in 2009 — significantly lower than the official target of 600,000 bpd — as falling output of Nile Blend continues to offset the gains from Dar Blend.

The picture is mixed across the rest of non-OPEC Africa. Output is rising in Egypt, where new small fields are more than compensating for declining output at mature fields. Egyptian crude oil and condensate production averaged 673,000 bpd in 2008 — up 30,000 bpd (5%) on the previous year— and had exceeded 700,000 bpd by the middle of this year.

Oil output is also thought to be rising slowly in Gabon, where new fields developed by smaller independent oil companies are at least compensating for the declines at Rabi and Mandji. However, accurate and up-to-date information is hard to obtain. Although Gabon is participating in the EITI process, the latest report, published in March 2008, covers 2006 when output was just below 240,000 bpd. This year, Vaalco plans to expand output from its Ebouri and Etame fields by around 5,000 bpd.

Elsewhere in Africa output is falling slowly in Cameroon, Chad, Equatorial Guinea, the Ivory Coast, Mauritania and Tunisia, although higher output is expected from the Ivory Coast in 2009 following the start-up of CNRL’s 20,000-bpd offshore Olowi field in May and new wells at the Baobab and Espoir fields.

For a full insight into African oil, take a look at the African Oil & Gas Sourcebook 2010

Dominion faces Tullow in search for oil in Kenya

Posted  Monday, March 28 2011 at 00:00

The scramble for oil exploration blocks in Kenya has heightened as companies make last-ditch efforts to resolve the puzzle of why the country — despite sitting on a rich vein that has yielded oil elsewhere — is yet to strike wells with tangible quantities for exploration.

The jostling has gained tempo in the past year as assigned blocks change hands rapidly and more reputable miners compete for the handful of blocks that are yet to be allocated.

“Several companies with good experience and resource capacity for successful exploration are trooping in and we hope to at least strike something in the short term,” said Mr Martin Heya, the head of petroleum at the Ministry of Energy.

Raised expectations

The presence of two London listed firms — Dominion Petroleum and Tullow Oil — in particular has raised expectations of an oil find.

Tullow has said it will start seisimic tests and drilling in Northern Kenya while Dominion is betting on an offshore block it won a permit for last week.

Dominion elbowed strong competition to win one of three highly sought after blocks off the coast of Lamu dubbed Block L9.

“Kenya’s Block L9 represents one of the very few ‘ground floor’ opportunities remaining in the highly prospective, and increasingly attractive, East African offshore basins,” Dominion CEO Andrew Cochran said on Monday last week when he announced the acquisition.

One well, Simba 1, showed signs of potential gas reserves when it was sunk in 1979 while offshore oil seeps had been identified to the north of the block, which has similarities to Dominion’s Block 7 offshore Tanzania.

Dominion will take a 60 per cent stake of offshore block L9 in the Lamu Basin, with the government likely to take a 15 per cent share later.

The company will spend between Sh517 million ($6.15 million) and Sh3.87 billion ($46 million) on exploration over the next two to six years, according to the terms of the contract.

Oil and gas explorer, Tullow Oil through its local subsidiary Tullow Kenya BV, is scheduled to sink two wells within Blocks 10DD and 10A that hug the Lake Turkana Basin, raising expectations of a find as it did in neighbouring Uganda.

Tullow is next year expected to start oil production within the Albertine Basin in Uganda where billions of barrels of the precious commodity have been discovered.

Tullow entered oil exploration in Kenya after an agreement completed last month with East Africa-focused exploration firm Centric Energy which accepted to farm out to Tullow a 50 per cent interest in its Block 10BA in north-western Kenya.

In the deal that pushed to five the number of Tullow Kenya BV’s operated exploration blocks in northern Kenya, Tullow paid Sh80.7 million ($0.96 million) in historic costs and will finance 80 per cent of future expenditures to a limit of Sh2.5 billion ($30 million).

Fresh prospecting

Officials at the Energy Ministry said applications by several giant firms lining up for fresh prospecting activities continued to swell, despite past failed attempts to strike oil.

Kenya has so far awarded 26 of its existing 38 exploration blocks countrywide, creating a market for farm-in deals between smaller players holding stakes in the blocks and bigger players such as Apache Corporation and Anadarko Petroleum Corporation whose wealth of resources render hope of positive results.

The renewed interest among experienced firms and signs of gas and oil deposits have brought enthusiasm within government circles with Mr Heya looking beyond the prospects.

“When we discover oil ourselves, we shall bring it into production faster than our neighbours – we have the infrastructure, skilled people, a product pipeline, and a refinery – I think we can do it,” he was quoted by the Financial Times saying.