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Monday, 25 March 2013

Kenya may forcibly acquire land for power lines

The Kenya Electricity Transmission Company (KETRACO) says it may have to forcefully acquire land where it needs to put up infrastructure to transmit electricity.

CEO Joel Kiilu says his company will spend more than US 17-million dollars to compensate those affected by its Mombasa-Nairobi and Rabai-Lamu lines.

Kenya is developing a regional power grid system which it hopes will allow it to generate enough electricity for its own needs while exporting excess to its neighbours.

Japan eyes Mozambique gas

Anadarko Petroleum says it is in talks with potential Japanese customers to buy supplies from a Mozambican liquefied natural gas (LNG) plant it’s jointly planning with ENI. ENI is an Italian Oil and Gas major.

“We are advancing efforts with selective companies in Japan and we’re hopeful that the policy uncertainty about nuclear power and United States’ exports does not cause them to miss out,” Steve Hoyle, vice-president of LNG marketing based in The Woodlands, Texas, told Bloomberg. “None of those things are going to be clarified anytime soon.”

The partners have commissioned a plant in Mozambique with a capacity of five-million tons a year.

Aggreko to supply Namibia with gas-fired electricity from Mozambique

Glasgow-based Aggreko has embarked on a US 200-million dollar project to supply gas-fired electricity in Mozambique to Namibia, which is experiencing a shortfall of about 80 megawatts (MW).

The company is to set up an interim plant that will produce 122 megawatts (MW), of which 90 MW is to be sold to Namibia via the region’s grid. The remainder of the power will be sold to Mozambique. Namibia is experiencing a shortfall of about 80 MW.

The contract is for two years, and the plant taps into Sasol’s gas pipeline at a facility near the Komatipoort border post.

Aggreko and South African joint venture partner Shanduka are already supplying 110 MW of power to EDM and South African utility ESKOM from the power plant at Ressano Garcia, which was built last year and started production in July.

Chinese Company buys stake in ENI's Mozambique gas field

Italy's Eni SpA has sold a 20% stake in its giant natural gas field offshore Mozambique for US 4.2 billion dollars to China National Petroleum Corporation (CNPC), the latest in a string of Chinese deals aimed at boosting the country's overseas energy production.

The deal also firmly places the Chinese flag in the burgeoning East African energy sector, following an investment in oil discoveries in Uganda last year by Chinese National Offshore Oil Corporation (CNOOC). Analysts say oil and gas discoveries in East Africa are ideally placed to serve growing Asian energy demand.

Eni says it signed an agreement to sell 28.6% of its subsidiary Eni East Africa, which owns the Area 4 offshore gas field in Mozambique, to CNPC. This allows CNPC to indirectly own a 20% stake in the field, which has potential reserves of 75-trillion cubic feet of gas in place, equivalent to about four years’ total European gas demand.

This is a major boost for one of China's biggest import driven energy companies that looks to Africa and the world to secure its country's future energy demands. It also gives ENI a secure market for its LNG(Liquefied Natural Gas) production and cash required to develop expensive LNG processing and handling facilities. 

Mozambique - Cahora Bassa increases water discharge rate

Hidroelectrica de Cahora Bassa (HCB), the company that operates the Cahora Bassa dam on the Zambezi River, Mozambique, has increased discharge rate of water to ensure “the hydraulic and operational safety of the dam,” and warned people to avoid downstream areas.

Cahora Bassa discharges water at a rate of 1 800 cubic metres per second (m3/s). It has maintained this level of discharge for over a month, although much more water has entered the dam reservoir from upstream. As a result the Cahora Bassa lake is now 70% full. HCB will gradually increase the discharges to 2 800 m3/s.

This is a precautionary measure meant to safeguard the dam against operational risk, though there is a risk of rising water levels for people living downstream.

Gulf Power Thermal Power Plant to increase Kenya's electricity output

Kenya’s electricity generating capacity is set to receive an 80 megawatt (MW) boost when a new private power project sponsored by local investors is completed in the next 12 months. 

Gulf Power, an independent power producer (IPP) established by a consortium of Kenyan investors, will produce power from a thermal power plant on Mombasa Road, near Athi River, Nairobi.

Gulf has signed a power purchase agreement with Kenya Power Company for purchase and distribution of the electricity it will generate. 

Agreements were recently reached between the Government of Kenya, Kenya Power, the World Bank, JP Morgan Chase Bank of London and Gulf Power for two partial risk guarantees for US 35-million dollars and €7-million. 

The added electricity capacity will go a long way to boost power stability on the grid especially in areas around the capital  Nairobi. Kenya's current power generation capacity is  approximately 1,800MW.

Friday, 15 March 2013

Taking the mining sector forward - Tanzania

Once held up as the perfect example of how to develop a mining sector in Africa, Tanzania is now looking to regain lost momentum.

By Nelly Nyagah, Frontier Market Network

Tanzania’s mining sector is in a lull even as junior explorers troop into other African countries to grab opportunities.
Ranked as Africa’s fourth-largest gold producer and the world’s sole producer of Tanzanite, Tanzania has attracted a few international mining majors who control current production in six mines.
A decade ago, the East African nation was considered a benchmark for countries looking to successfully build a greenfield mining industry. Tanzania held its first multi-party election in 1995 and soon after started courting mining companies under very attractive terms. Gold royalties were set at 3% and corporate tax almost nil, with companies required to only pay US$200,000 annually. The generous terms attracted Australia’s Resolute Mining Ltd. who opened the first commercial gold mine, followed by Barrick Gold and Anglo Gold Ashanti. Gold accounts for over 50% of the country’s non-traditional exports.
However, there is little evidence to suggest a second wave of development and the country remains relatively under-explored. Potential investors perhaps assume that first movers like Resolute and Barrick locked up all prospective land. Eugene Obiero, a resources industry expert and Principal consultant for Visagio in East Africa, says this is not the case.
“Prime acreage in prospective mining districts is held by local individuals. One could say these are the culprits who are locking out junior exploration companies. So, for explorers to get into an area they have to either buy out the small individual owners or work with them as a group. This is an arduous undertaking considering the numerous interests,” says Eugene.
To rectify this problem and others, which include imbalances in earnings for the country, the government introduced a revised mining policy and Mining Act (2010). Although two years on the government and the majors are still negotiating over its implementation, the impact of the changes is being felt in areas such as ownership of prospective land.

“The new Mining Act, which was legislated in 2010, is very clear on the use-it-or-lose-it requirement; owners of land are required to file reports to prove that they are using it,” says Eugene. To force companies to relinquish idle lands, the Act also instructs a hike in rents (from $40 to $100) and transfer fees.

New opportunities are arising out of the tough requirements; locals are now looking for foreign companies to establish joint ventures and farm-outs. So, what options do potential explorers have in their bid to acquire prime prospective land?
“The best option is for foreign explorers to partner with large-scale acreage holders who are ready to present their acreage as equity in mining projects,” says Eugene, adding that outright ownership of acreage is very limited, and local content considerations also come into play.
The new mining policy includes an increase in royalties as follows; diamond and uncut gemstones (5%), uranium (5%), gold and all metallic minerals (4%), gems (cut and polished - 1%) and 3% for industrial and other minerals.
“Understandably the new fiscal regime is giving the majors jitters. They question the drastic increases and say they are unsure how the Act would be implemented. On the other hand, the government understands its obligations to the investors but is very keen to address questions by citizens on how they can benefit more from their wealth,” says African mining analyst, Stephen Okofor.
As the country seeks new investment to drive the sector forward, it also has to grapple with structural challenges in the operating environment.

“Lack of adequate supply and cost of power is a major issue. The lack of mining infrastructure is holding back projects, while the insecurity in remote locations where deposits tend to be located is troubling. Added to this are the problems with communities around mining operations,” says Eugene.
There are efforts being made to mitigate the problems, says Eugene, for instance, the rehabilitation of the central railway line, use of gas and coal to provide reliable power, and fixing the relationships between mining companies and communities.
“The existing mines will soon mature and new projects are few. The good news is that everyone is in agreement more needs to be done to fully exploit Tanzania’s mining wealth,” says Stephen.

This article was first published by Frontier Market Network 

Frontier Market Network is a business platform that allows members to access a range of unique business and investment opportunities specific to their industry and region of interest. The network also allows members to establish business networks and relationships with other members based upon common business interests and activities.  Register on the platform to access business intelligence, investment and business opportunities

Tuesday, 12 March 2013

Sudan, S. Sudan agree to oil flow restart within 2 weeks -mediator

Sudan and South Sudan have agreed to order the resumption of the flow of southern oil exports through pipelines in Sudan within two weeks, an African Union mediator said early on Tuesday.

Landlocked South Sudan shut down its 350,000 barrel-per-day output over a year ago in a row with Khartoum over fees.
When asked when the orders would be given to resume oil flows, former South African President Thabo Mbeki, who is mediating between the two sides, told reporters: "The instruction to the companies is D-day (March 10) plus 14." 

According to Reuters

Tanzania adds Rukwa project to National Energy Strategy – Kibo

The Tanzanian Ministry of Energy and Minerals (MEM) has included Kibo Mining’s Rukwa coal-to-power project as a strategic component of the Tanzanian government’s National Energy Strategy.
The MEM would undertake to “participate proactively in procuring the establishment of this vital infrastructure node in the Mbeya region” and confirmed its support for the expedited development of the project, Kibo pointed out in a statement to shareholders.
The Rukwa project was situated close to the Mtwara Corridor – an area in which the government had committed to infrastructure development and which had seen recent multimillion-dollar investment in coal, coal-fired power stations and uranium exploration.
The most recent discussions between Kibo and the MEM would now allow the company to conclude the final selection process for an appropriate development partner acceptable to the company as well as the State.
Kibo CEO Louis Coetzee said the inclusion of Rukwa in the National Energy Strategy was the company’s most significant milestone since its readmission to the London Stock Exchange's Aim, in 2010.

“The Rukwa project is intended to be one of the cornerstones of a regional infrastructure development node on the Western gateway of the Mtwara Corridor, and we are honoured to have this opportunity to continue to build value for our shareholders and the people of Tanzania,” he commented.
Kibo was currently developing five project areas in Tanzania, of which the Rukwa coal project was the most advanced.
A significant mineral resource of thermal coal at Rukwa had already been defined, providing what the company believed to be nearer-term development and commercialisation potential.
“This is further supported by strong support expressed by the Tanzanian government for the expedited development of a coal mine and mine-mouth coal- fired power plant based at the Rukwa project,” the company noted.
Through a subsidiary of its majority-owned Mzuri Energy, Kibo signed a memorandum of understanding in 2012 with an Asian conglomerate to develop a 250 MW to 350 MW power station alongside the Rukwa coal project.

Friday, 1 March 2013

Elections Jitters in Kenya affecting oil and gas investments

With next week’s elections on 4th March just days away, international investors in Kenya's burgeoning oil and gas sector are holding back investments for exploration. They are waiting to see the outcome of next week's presidential election, worried about the potential for violence and possible policy changes under a new government.
Huge petrochemical discoveries in eastern Africa from southern Sudan all the way down to Mozambique have attracted bids from international oil companies for exploration and drilling rights.
Kenya's sector is the least mature, with medium-sized companies heading the search for commercial reserves. These firms are more vulnerable than majors to the risk such as political instability and violence, which five years ago strangled the Kenyan economy and forced political rivals to form a shaky coalition government.
With President Mwai Kibaki leaving the political stage after a career of over 50years, Kenya's forthcoming change in leadership is also creating concerns that the government may alter contractual terms.
Companies such as Canada’s Simba Energy were prepared to begin drilling in 2013 but had to consider feedback from some potential farm-in partners, said Hassan Hassan, Simba's Chief Operating Officer. So they have decided to wait and see.
The uncertainty is affecting new money. Explorers already licensed in Kenya are locked into strict investment agreements and are still releasing capital towards operations. It takes on average US$30m to drill a well. If they do not do so then there are penalties to be inflicted upon them.
The main concern making investors jittery is possibility of a trade sanctions, a one of the leading front-runners in the race, former Finance Minister Uhuru Kenyatta, faces trial for crimes against humanity related to the election violence in 2007/2008.
If Mr. Kenyatta is elected, western governments will face a dilemma over how to balance a principled stance against strategic interests such as security and trade ties with Kenya. The petrochemical story in the region has made Kenya even more strategic due to its location and level of economic advancement in comparison to its neighbours.   
The United States has cautioned that "choices have consequences" as relating to electing leaders that have been indicted for crimes against humanity. Officials in other Western capitals have said any talk of economic sanctions is premature, but some investors are anxious either way.
The stakes are rising. British explorer Tullow Oil this month announced Kenya's first potentially commercial flow rates, taking it a step closer to production.
Tullow's venture partner, Africa Oil, estimates there are 23 billion barrels of oil beneath two onshore basins that extend from southern Ethiopia to the southwestern tip of Kenya.
Kenya's next president will most probably oversee multi-billion dollar investments and new legislation to govern production agreements and how to spend hotly anticipated petrodollars.
Some oil players are concerned that the leading presidential hopefuls have not laid out more detailed plans for infrastructure, taxation and the handling of oil proceeds.
If Kenya is to produce and export oil and help its landlocked neighbours export too, it will need a pipeline network stretching hundreds of kilometres to link inland oil fields to the coast. It will need a new refinery to supply the domestic market from its own crude. The existing facility in Mombasa is dilapidated and runs only at partial capacity.
And while there are laws that set out how oil revenue is spent, they are old and vague. The 13-page Petroleum Act became law in 1986. Back then, few expected a serious oil find.
Nine oil companies operating in Kenya including Tullow, Anadarko and Africa Oil have formed the Kenya Oil and Gas Association. It wants the government to legislate faster.
They point to neighbouring Uganda; where commercial production is finally slated for 2017 after being delayed almost a decade by rows over tax and infrastructure projects, and hope Kenya avoids such setbacks.
The major oil companies are poised to come in once the small-caps have done the dirty work. With days to go to the polls, it’s now a wait and see game.