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Friday, 27 July 2012

Kenya House @ The Olympics

Kenyans are known for their athletic prowess, especially in winning medals at the Olympics. This year, The Government of Kenya is leveraging on this by having a Kenya House near the Olympics Park. Where guests can interact with Kenyan sportsmen and officials, while finding out more about Kenya.

The House is being used to promote Kenya's investment and trade opportunities. These include her main exports of tea, coffee, horticulture and tourism. This time not to be left behind Infrastructure projects are also being showcased such as the LAPSSET Projects (Lamu Port etc), Energy Projects and Konza ICT city to mention but a few.

For those who cannot go to West Ham Lane, Stratford, London between the 27th July and 12th August, you can catch the action in the House online via , Where you can attend sessions virtually via various streams, contribute, debate and ask questions.

Companies in the oil & gas exploration scene is East Africa

East Africa is the latest oil & gas frontier and this fact cannot be underestimated. I have done some quick research on the companies currently in the Exploration and Production (E&P) scene in the region and these is what I found (see list below). The list may not be conclusive because the situation is so fluid with Farm in/Farm out contracts, mergers & acquisitions continuously happening as I scribble.

The companies come from all over the world ranging from the large integrated multinational oil companies such as ENI and Total, to specialist exploration companies such as Tullow, Africa Oil and Anadarko to mere speculators (mostly local) who acquire exploration block licenses just to sell out to companies with capacity i.e. money and expertise to explore, albeit at a profit.  

Companies I have definitely left out are the oil and gas services companies such as Schlumberger, Weatherford, Baker Hughes, Halliburton, Sakson, P.N.Mariot, GID, CPTD(China), Great Wall (China) who I believe are the main companies offering various services that enable drilling to happen. These companies operate below the surface and are sub-contractors of the companies listed below.

If you require more detailed research on these companies and their activities please contact the blogger?

Country of operation
Beach Petroleum
Pancontinental Oil and Gas and its
partner  First Australian Resources (FAR) Ltd
Kenya Tanzania & Mozambique
Africa Oil
Kenya, Ethiopia & Somalia
Leopardus Resources Limited
Orca Exploration Group
Pacific Seaboard Investments
Rift Energy Corp.
China National Offshore Oil Corporation
Kenya, Tanzania & Uganda
Kenya, Tanzania & Mozambique
Japan Oil, Gas and Metals National Corporation
Mitsui & Co Europe PLC
National Oil Corporation of Kenya (NOCK) and
Kenya,  Tanzania & Mozambique
Sasol Petroleum International,
South Africa
BG Gas
Cove Energy
Mozambique & Kenya
Dominion Petroleum
Kenya, Tanzania & Uganda
Heritage oil
Tanzania & DR Congo
Madagascar Oil
Ophir Energy
Tanzania & Kenya
Origin Oil
Premier Oil
Tullow oil
UK & Ireland
Kenya, Ethiopia & Uganda
Anadarko Corporation
Kenya, Mozambique & Tanzania
Apache Petroleum Corp
Enron Oil and Gas Resources Inc
ERHC Energy
CAMAC Energy Inc
USA, Texas
Marathon Oil
USA, Texas

Tuesday, 24 July 2012

New Olkaria Geothermal plant in Kenya launched

Yesterday the President of Kenya, H.E. Mwai Kibaki launched the construction of a 280MW geothermal project at Olkaria, 100Kms from the capital Nairobi.  The new plant will cost approx. USD 1Billion and will be the largest geothermal power plant in Africa when completed in 2014. It will cumulatively increase Kenya’s electricity capacity by 40% from the current 1500MW, considering other projects already under development. 

This is good for the country because its current shortfall at peak demand is currently 200MW. Electricity supply is also known to be erratic and expensive compared to other countries in the region.

The project is funded by Kengen, Kenya’s national power producer, The Government of Kenya, the Japanese International Cooperation Agency( JICA), The World Bank, German Development Bank , (KFW), The French Development bank( AFD), and The European Investment bank.

The project is being undertaken by a consortium made up of Japan’s Toyota Tsusho Corp and South Korea’s Hyundai Engineering & Construction building the main power plant. Sinopec of China is developing the steam field while construction of the substation and transmission lines is being done by India’s KEC. We see a predominantly Asian team participating in this project.

The project is part of the government’s Vision 2030 plan to increase the country’s power production to 3,750MW by 2018 and 15,000MW by 2030.

In the speeches yesterday most officials talked about cheaper renewable energy through geothermal energy and this plant and others to follow going a long way in creating a capacity reserve. A capacity reserve that will prevent blackouts and power shedding during peak demand. Kenya currently has an estimated proven reserve of 7,000MW of Geothermal Power.
From my analysis I predict that when plant is complete it won’t have made a difference to the reserve capacity as it would have only gone to quench the current and growing power deficit. With the ongoing rapid rural electrification program, growing population and expanding foreign investment in business, manufacturing and commerce, the growth in demand should be about 10% per year. Even more I don’t believe the power will be cheaper, immediately, as the loans taken from the international lenders mentioned above have to be paid back with interest over period of time. My prediction is that power from this plant will be cost effective and cheaper  after around 10 years.

Currently only 15% of homes in Kenya have domestic power from the national grid, while industries go without power for an average of 6 hours a week or more( According to Ms Betty Maina, the Chairlady of the Kenya Association of Manufacturers). But all in all congratulations to the Kenyan government for successfully pushing through such a large and strategic project to increase provision of power that many Kenyans have been yearning for and that will make Kenya’s electricity more stable and cheaper in the long run.

Wednesday, 18 July 2012

Kenyan Cement Factory requests Expression of Interest in Renewable Energy Projects

The East African Portland Cement requests for expressions of interest for waste heat recovery and power generation projects equipment supplier. Click on the link below for details.

This is to enable the company improve its energy efficiency through demand side energy management, by reusing the heat it expunges (Waste Heat Recovery(WHR)) while making cement.

Its also looking at exploring other options to meet the shortfall in energy it might get through WHR via a coal plant, solar, gasification plant etc.

This is the ideal way to go for the more than 6 cement factories in region, and the ones planned for development. Demand Side Energy Management has been around for a while and its good to see a Kenyan company taking action.

Friday, 13 July 2012

Construction of a 1,000Km power line between Ethiopia and Kenya to commence soon.

The World Bank has approved funding for a 1,000km high voltage transmission power line between Ethiopia and Kenya. According to Reuters the power line is part of a bigger US$1.3 billion funding programme that will create a power pool linking countries within East Africa and transmit 300MW of power from Ethiopia to Kenya.

Ethiopia has surplus power due to its abundance of hydroelectric generation capacity. Though according to studies, 80% of its population remains without domestic electricity.

Kenya is set to gain from a more sustainable electricity source, considering its 1,300MW capacity fluctuates due to the effects of climate change as its rivers dry during recurrent droughts. Kenya’s hydro power generation is slightly above 50% at maximum capacity and declines significantly during droughts necessitating the uptake of power from thermal plants that use diesel and fuel oil. Which are both expensive and environmentally unfriendly.

Other than transmitting power, the transmission line is to form part of the East Africa Power Pool connecting the countries of Kenya , Uganda, Tanzania, Ethiopia, South Sudan and Rwanda. This will increase power trading between these countries enabling countries with surplus to sell to those in deficit, reducing occurrences of black outs and power shading.

The power line is also set to pass through the Marsabit region of northern Kenya, which has one of the highest wind speeds in the region. This will enable the three planned wind power projects in that area to commence. As the main hindrance to these projects taking off was a lack of access to the national grid. This should further boost Kenya’s renewable energy generating capacity in the medium term.

The people of northern and north eastern Kenya, historically marginalized, and who mostly do not have access to domestic electricity are likely to be connected to the grid as the electricity will most likely be supplied to them first as a priority.

However, my thoughts are that though the Kenyan grid will become more stable with more consistency in electricity supply, the cost of power isn’t likely to go down in the medium term. This is because these projects and others associated to it will have to be financed by borrowed international funds which have to be repaid through a surcharge on power bills, before cheap power can be available to Kenyans. Therefore, the wait for cheaper electricity should take a bit longer.

As for Ethiopia, this project will mean stronger political and economic ties to its southern friendly neighbor, Kenya, as it continues to posture with its hostile neighbors to the north and north east.

Saturday, 7 July 2012

Oil and Gas East Africa: The opportunities and the challenges

A lot has been reported about the oil and gas exploration in Eastern Africa and the region being the latest hydrocarbon frontier.

 It began a few years ago with the discoveries of large natural gas deposits offshore Tanzania and Mozambique. Recoverable reserves have today topped 100 trillion cubic feet of natural gas (Tanzania and Mozambique sharing 28 & 72 trillion cubic feet respectively). This is enough to supply the whole world with natural gas supply for a year. Also, around 2006, 2.5 billion barrels of crude oil were discovered in the Lake Albert region in western Uganda, in addition to previous finds of approximately 6 billion barrels of crude in the then Sudan.

According to studies done by the US Geological Survey, its estimated that the Eastern African region stretching from Somalia to the Seychelles in the East and down to Madagascar in the South and West to Mozambique could have as much as 441 trillion cubic feet of natural gas. This is about 50% more than what Saudi Arabia has in proven reserves to date. Hence, the frenzy to acquire exploration blocks in Eastern Africa.

With a little over 2 dozen exploration companies such as Anadarko, Mitsui & Co, Tullow Oil, Africa Oil, Cove Energy, Ophir Energy, BG already operating in the region and more established multinationals like ENI, Statoil and Total also catching up with recent forays in exploration activity. The region is a beehive in Exploration and Production (E&P) investment.

However, the region seems not to have been ready for oil and gas E&P. With tens of billion of USD dollars coming into the region to develop the sector a few challenges have cropped up.

1. Lack of established legislative and policy frameworks to manage the sector. This has led to governments awarding E&P contracts in unclear circumstances, with profit share from the oil and gas revenues not very clear to the public. This has encouraged the next challenge:

2. Corruption, because exploration contracts are awarded in an opaque manner corruption is bound to flourish as the awarding authorities could decide to privately benefit from highly demanded exploration blocks, at the expense of their countries and people.

 3. Lack of skilled manpower. Oil and gas exploration and drilling is a specialized skills set that requires highly trained engineers and technicians in addition to specialist supply chain and operational staff. These take years to train and orient.

4. Another challenge is infrastructure, as this oil and gas is being drilled offshore and in remote onshore sites, the closest major towns are ill equipped to process this bounty. In the next few years we should expect more refineries, pipelines and Liquefied Natural Gas(LNG) plants to convert natural gas into liquid form so as to transport it to markets overseas in large sea bound tankers. We should also see gas powered plants that burn the gas to produce electricity in eastern and southern African countries. This will necessitate the laying of gas pipelines to transport this product cheaply. The South African market is ripe for gas powered plants because it currently relies 88% on dirty coal fired plants that are heavy polluters. Natural gas is said to be more environmentally friendly. Airports and sea ports will also be required to transport personnel, equipment and supplies that are required in the development of oil and gas fields.

Because of the discoveries of natural gas to the South of Kenya, the Government of Kenya has been issuing exploration blocks at break neck speed since late 2011. In the past one week Kenya has issued 7 of the 12 remaining exploration blocks available.  With ENI of Italy signing on 3 blocks and the four other blocks going to Total, ERHC Energy, Rift Energy and Pacific Seaboard Investments. Of the remaining 5 blocks Statoil and a Qatar based company are in negotiations with the government.

This has led the Somalia Transitional Government (STG) to protest as some of the off shore blocks that were allocated are in disputed territorial waters between Kenya and Somalia. According to the Kenyan Government the convention of boundaries in international water is due East from the point of the on land boundary, this is the agreed convention that governs the offshore boundaries on the eastern Africa coast. However, the STG claims that the border should be perpendicular to the coastline therefore precipitating the dispute.

Disputes related to oil and gas in the Sudan’s has led to armed confrontations between the north and southern neighbors, that has led to a shutdown of the flow oil from the oil wells in the border region of Heglig (South Kordofan state). This resulted in the drying up of the South’s oil revenue that was 96% of its budget. It has since negotiated with Kenya to build an alternative pipeline through Kenya to the port town of Lamu to export its crude oil.

The North has fared slightly better with a reduced capacity of 115,000 bpd. In a bid to increase revenue Sudan(North) has signed oil E&P sharing deals with foreign companies for 9 blocks worth US$ 1 billion, in the hope of bringing on-stream production worth a minimum of 65,000 bpd by end of 2012. This is to offset economic woes that were precipitated by the country loosing three quarters of its oil revenues when the South split from it in 2011.

In Uganda after the discovery of oil through the exploration initiatives of Tullow oil in the Lake Albert region. The country is set to start production of 2.4 billion barrels of crude at a cost of US$10 billion, albeit on a small scale to begin with,  by 2014. This is after a protracted legal and policy battle between its government and Tullow Oil. An agreeable E&P production sharing agreement was finally reached in early 2012 that led to Farm out deal where Tullow sold part of its stake in the oil fields to China’s CNOOC and Total to enable the company obtain resources to produce crude while cashing in on its earlier exploration initiatives.

The Kenyan discovery in Turkana, Northern Kenya is still under validation after Tullow Oil stopped drilling at the Ngamia 1 well and is moving its rig to the Twiga 1 site in the same vicinity as it also prepares to drill in Ethiopia where it hopes to find more oil. The commercial viability of the Ngamia 1 find look promising according to Tullow’s website.

The drilling for oil the semi-autonomous region of Puntland in Somalia has been reported but the news on the on goings there are hard to come by, Africa Oil is the company drilling there.

The petro-dollar cheetah economies of Eastern Africa are on their starting blocks. If the challenges mentioned above are not adequately addressed, the resource curse, which has afflicted African countries in the west, is bound to ensue. We hope and pray for the best.