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Editorial comment

In 2014, Africa produced some 8.2 million bpd of crude oil, the majority of which came from the north and west of the continent; from Nigeria, Algeria, Egypt and Angola. But with a new export pipeline agreed from Uganda to Kenya by Presidents Yoweri Museveni and Uhuru Kenyatta in August, and prospects for South Africa, Mozambique and Tanzania on the radar, we can begin to look east and south for new growth in Africa.

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Kenya and Uganda have finally agreed on the route of a planned oil pipeline that will send crude from both countries to the Kenyan coast for export. Landlocked Uganda is estimated to hold 6.5 billion bbls of crude in its Albertine basin near the border with the Democratic Republic of Congo. Uganda, home to sub-Saharan Africa’s fourth largest supply of crude oil, hopes to produce first oil in early 2018 and to build a refinery by this date as well. CNOOC, Tullow Oil and Total have all been struggling to release potential in the country, with only CNOOC successful in receiving a license to produce from the Kingfisher field.

Kenya holds a smaller 600 million bbls of crude and has hopes of becoming a regional hub, with talk of a new port at Lamu and a new terminal in Mombasa.

The new pipeline will allow Tullow to start exporting from joint ventures with Africa Oil Corp. and Total SA. The 1500 km pipeline route will run from Uganda’s Hoima district through Lokichar and onto the Kenyan coastal town of Lamu.

The pipeline will pass through Kenya’s northern Lokichar basin, a cheaper route than alternative southern ROWs, but one that is deemed more vulnerable to security issues and militant attacks. The pipe will pass through swamplands, national parks and wildlife reserves. The project still depends on financing arrangements and security guarantees from Kenya. The projected cost is 404.8 billion Kenyan shillings (US$4 billion) but the World Bank has offered just 54 million shillings.

The two governments also agreed to build a reverse flow pipeline, to carry imported petroleum from Mombasa to Kampala, and also from a refinery in Uganda to Kenya. Another proposed project would build a pipeline from South Sudan and Ethiopia to join up with the Uganda-Kenya pipeline.

The long-awaited pipeline agreement means that exploration and production work will finally begin in Uganda; without it, the international companies working in the country would not begin developing the fields. Once built, the pipeline will be the world’s longest heated pipeline (Ugandan oil has a waxy quality).

Elsewhere in Africa, the fall in oil prices has taken a familiar toll in terms of slowing activity, but is perhaps also spurring African countries to do all they can to create favourable conditions for much needed investment. Tanzania has passed a more progressive Petroleum Bill and is laying out a draft for local content policies. Kenya’s Competition Authority has been praised for its clever handling of its exploration sector. South Africa’s ruling ANC party has backed a plan to separate legislation for oil and gas from that of mining, in a move welcomed by those looking for a shale revolution in the nation (South Africa’s shale resources are considered to be among the top 10 largest in the world). Mozambique hopes to bring its gas reserves online in 2019, looking to become the third largest LNG supplier after Qatar and Australia.

Amid all of this potential, matters of infrastructure and regulatory environment are still a massive concern: will assets remain locked in, without hope of commercial realisation, because the necessary pipelines, roads and local and national regulatory legislation are not in place? The much-heralded hydrocarbon finds in countries such as Mozambique, Tanzania and Uganda may come to nothing if politics gets in the way. When Uganda’s President Museveni repeatedly calls Uganda’s oil deposits ‘my oil’, the issue of stewardship needs to be urgently addressed.

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