East Africa remains hot property

OE Staff Oct 9, 2013

Wood Mackenzie has predicted upstream investment in East Africa will reach US$7 billion by 2018.

Martin Kelly, head of Sub Sahara Africa upstream research for Wood Mackenzie, told delegates at the East Africa Oil and Gas Conference today that with more than 130Tcf of gas and about 2billion bbl discovered to date, East Africa still has the same again in yet to find potential.

Mr Kelly predicted a fascinating 12-18 months ahead for the region, as exploration continues, development plans unfold and a number of high profile deals are completed.

Mr Kelly highlighted 2012 as an exceptional year for the area, with more than 50 wells completed, resulting in the region accounting for nearly half of the total volumes discovered through conventional exploration globally.

Kelly said: “Overall, the outlook for East Africa is a positive one, with a great deal of upstream activity over the next year or so. Onshore developments in Kenya look very promising at this stage; Tullow has discovered over 350MM bbl, which we believe is enough for a commercial development to proceed. "Neighbouring Uganda is also poised to become a major exporter of oil, as the 1.2BBL Lake Albert project moves forward.

"Nevertheless, export options are currently a challenge for both countries and there are a number of export pipeline proposals currently being considered, which will be the key driver for regional development.

“Upstream capital investment in East Africa has averaged about US$1 billion a year since 2010, excluding exploration investment. As these discoveries are developed, we expect to see levels of investment grow at an average of around 60% per year until 2018.

"We see the highest levels of investment in Tanzania, Mozambique and Uganda. The surge in investment will also cause East Africa’s oil and gas production to triple from around 500,000 boe/d, to 1.5MM boe,” Kelly added.

“For many of the industry’s major players the lure of yet-to-find volumes may not be enough. In order to realise this level of investment, it is key that the right incentives are in place as companies will be looking for attractive rates of return and a stable fiscal environment. Striking a balance between investors and governments will not be straightforward, but East Africa appears to be off to good start.”

He concluded: “There has been great success in the region so far and there is still plenty to go after. Of course there are a number of challenges to overcome in terms of available infrastructure, export routes and fiscal stability, in order for the sector to realise its full potential. However, the economics of the proposed projects are very positive - delivering good returns to investors in what is set to be an exciting time for the region’s upstream sector.”