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Monday, 24 June 2013

Renamo threatens to disrupt Mozambican coal railway line

Speaking to reporters on 19 June, Mozambique's opposition party – the National Resistance Movement (Resistência Nacional Moçambicana: Renamo) – has threatened to paralyse the movement of trains of the railway between Beira-Moatize and Beira-Morromeu. The Sena rail line, which incorporates the Moatize mining area, is a key transport route for transporting coal to Beira, while Morromeu is a sugar-producing area. It was also suggested that Renamo would block traffic on the EN1 main highway that connects southern and northern Mozambique, following claims by Renamo that the government uses vehicles to transport weaponry and soldiers in plain clothes.

Renamo's threats come at a time of increased tensions with the government after party leader Afonso Dhlakama retreated to a bush base in the Gorongosa area with some ex-combatants in October 2012 and warned of the potential for fresh violence. The party's grievances span a range of issues, including electoral reform ahead of municipal elections in November 2013 and general elections in 2014.

The latest threats may be a means of attempting to add pressure to their demands. However, with limited progress likely in successive rounds of talks, this elevates the risk of Renamo elements attempting to carry out the party's threat against infrastructure targets that could cause operational disruption for mining and exporting activities such as coal.

Tuesday, 18 June 2013

Seychelles opens up to oil explorers

The Seychelles have invited oil and gas companies to bid for exploration blocks, ending a two-year moratorium and introducing new rules for bidders after completing a review of laws regulating the sector.

East Africa has become a focus for exploration after oil discoveries in Uganda and Kenya as well as natural gas finds in Tanzania and Mozambique.

The Indian Ocean islands are attracting interest but had put off licensing more blocks until it reviewed its laws. Seychelles does not have a fixed number of exploration areas, but companies can bid for areas of up to 10 000 square km each out of its 1,3 million km2 exclusive economic zone.

In March, PetroSeychelles said companies had approached it for areas but could not place bids before the new legislation was in place. Under the new licensing regulation, exploration companies will be required to pay 10% of petroleum revenues as a royalty, up from a previous 5%.

Nile dam raises tensions between Egypt, Ethiopia

Tensions between Egypt and Ethiopia are rising after Ethiopia began diverting the water of a Nile River tributary to build the continent's biggest hydroelectric power plant. Despite criticism from Egypt, Ethiopia says construction of the dam will proceed.

Ethiopia summoned the Egyptian ambassador to demand an explanation after Egyptian politicians were overheard on a live broadcast discussing ways to sabotage the Great Ethiopian Renaissance Dam, after Ethiopia started diverting a part of the Blue Nile for the construction of the US4.7-billion dollar dam.

Scheduled for completion in 2017, the dam will transform Ethiopia into Africa's biggest power producer. While the construction started almost two years ago, it was not until the diversion that tension between Egypt and Ethiopia broke into public view. The government in Cairo said it has not approved the building of the dam, and vowed to prevent the dam from reducing Egypt's water supply.

Scheduled for completion in 2017, the dam will transform Ethiopia into Africa's biggest power producer. While the construction started almost two years ago, it was not until the diversion that tension between Egypt and Ethiopia broke into public view. The government in Cairo said it has not approved the building of the dam, and vowed to prevent the dam from reducing Egypt's water supply.

Saturday, 15 June 2013

Industry Conferences, Summits, Conventions 2013

The following are 2 exciting events in the oil, gas scene in Eastern Africa and beyond. 

The East African Oil & Gas Infrastructure Security Summit
25th – 26th June 2013
Nairobi, Kenya

The Africa & Middle East Oil & Gas Summit 2013
30th Sept - 1st October 2013
Abu Dhabi, UAE

Friday, 7 June 2013

DRC - Inga 1 hydro-power site to be refurbished

Voith, a German engineering company, signed a deal worth more than US 74-million dollars with Democratic Republic of Congo’s electricity utility to refurbish part of the Inga 1 hydro-power site.

The closely held company, based in Heidenheim, will refurbish two generating plants of Societe Nationale d’Electricite, or SNEL, that produce a combined 110 megawatts (MW) of power, Bloomberg reports.

Kinshasa, Bandundu city and the provinces of Bas Congo and Katanga will benefit from the increased output. Inga 1 is more than 40 years old and operates below its 350 MW of installed capacity, according to the World Bank, which is providing financing for the rehabilitation project.

Congo is also refurbishing the 1 424 MW Inga 2 site, and wants to break ground on a third Inga project in 2015. Inga 3 will produce about 4 800 MW of power and cost at least US 8.5-billion dollars. 

Monday, 3 June 2013

Mozambique to Offer New Oil & Gas Blocks

Mozambique is adding to its geological database with a view to launching new tenders for the licensing of oil and gas blocks later this year.

Macauhub quoted Mozambican National Oil Institute chairman Arsénio Mabote as saying that seismic and aeromagnetic surveys are being carried out, both onshore and offshore. The data gathered will be provided to companies interested in making tender proposals.

Mabote, while addressing an international conference on energy in Maputo, said that he had been asked on a regular basis to launch new tenders, and that the surveys being carried out would help companies to put forward more solid proposals.

Alongside the new tenders, legislation is under review with a view to accommodating gas projects, such as the LNG and coal gas industries.

Mabote added that from an oil and gas surveying point the country is vastly underexplored, given that over 170 Tcf of natural gas that has been discovered was found in just in a 50 km radius.

“We have a lot of mining resources, but if we could find oil that would be even better,” said Mabote, reiterating that the geological characteristics of the Mozambican coast point to the existence of liquid hydrocarbons.

Tullow lifts a corner on Africa's oil payments curtain

* Tullow data covers 8 countries, but not contract terms
* U.S., EU legislation will require greater transparency
* Tullow says Uganda could earn $50 bln from existing finds

By Andrew Callus, Reuters

Africa-focused Tullow Oil Plc took a step this week towards the extra openness on government payments anti-corruption legislators want, releasing figures by country, and by payment type, for the first time.
In its 2012 corporate responsibility report, Africa's biggest independent international oil company published all the tax, royalty and other payments it has made to all governments around the world.
The report goes further than some larger companies have with disclosure, and offers a glimpse at the tens of billions of dollars pouring into the accounts of resource-rich African governments, but its disclosure level falls short of the demands of new legislation.
The sums paid are immense in the context of the economies of some of the poorest countries in the world, and legislators hope extra transparency will curb the corruption that has dogged extractive industries in Africa down the decades.
Tullow's report included payments it made to eight governments in sub-Saharan Africa, and comes as the non-binding Extractive Industries Transparency Initiative (EITI), to which its main producing country, Ghana, is a signatory, gathers momentum with countries and companies around the world.
It also follows recent transparency legislation in the United States, which goes further, insisting under rules linked to the Dodd-Frank Act that U.S.-registered companies disclose payments on a project-by-project basis.
Europe plans similarly tight rules under its proposed EU Accounting Directive.
The American Petroleum Institute, of which large oil companies such as Royal Dutch/Shell and Exxon Mobil are members, is engaged in litigation against the rules implementing the U.S. legislation, arguing it puts them in an impossible legal position with regard to contract terms in certain countries, and forces the disclosure of competitively sensitive data.
Tullow is not bound by U.S. legislation, and did not reveal contract details in its report. "We are prohibited from doing that in certain countries," said Chairman Simon Thompson.
However, he agreed that full project-by-project disclosure, as pioneered in Africa by Ghana, was the way forward, because it has "created an absolute level playing field so that everybody knows what everybody else's contract looks like and there are no commercial sensitivity issues as a result," he told Reuters.
"I think it's a very powerful example of transparency really working well and to the benefit of both of responsible companies and a responsible government."
Tullow is mainly an exploration company, and in the oil industry, the bulk of payments to governments come at the later, production stage.
It is also absent from the two dominant African producer countries - Nigeria and Angola - where contract terms and production costs may be quite different from the ones it pays. Tullow accounted for only 57,850 barrels per day (bpd) out of a total 6.2 million bpd from the region last year.
Nevertheless, it is the biggest international operator in the region outside the major integrated oil companies.
And its figures offer a glimpse of the scale of government oil income in a region where the World Bank says almost half the population exist below a poverty income threshold of $1.25 a day with some of the highest poverty rates in oil producing nations.
Tullow said it paid a total of $905 million in crude oil valued at $108 per barrel plus money to governments, of which about $751 million went to sub-Saharan Africa.
Even stripping out a $143 million disputed corporation tax payment in Uganda for the sale of some exploration assets, that amounts to more than $30 for each of the 21 million barrels Tullow produced there in 2012.
At that rate, the region's total output of 2.263 billion barrels a year would be yielding well over $60 billion a year for the governments. That compares with total 2011 Overseas Development Aid to sub-Saharan Africa of $45 billion, according to OECD figures.
Gas revenue, mainly for Nigeria and Angola at present, but in future potentially for Mozambique, Tanzania and others, would be on top of that.
"This (transparency push) is all about making sure the vast amounts of money these resources could earn, are all accounted for and used properly - bearing in mind these are non-renewable resources," said Carl Dolan, senior policy officer at the pressure group Transparency International.
"This is why this legislation is so badly needed. This is a once in a lifetime opportunity for these economies to put themselves on a sustainable footing."
Tullow also offered a flavour of the potential oil income awaiting oil frontier countries like Uganda, which has yet to produce any oil or gas, but where it sees promise.
Uganda's government can expect to earn $50 billion on behalf of its 35 million strong population from reserves already discovered over the lifetime of the fields, Tullow said - almost three years' worth of its $17 billion gross domestic product (GDP).
Uganda borders to its west with the Democratic Republic of Congo, whose eastern borderlands are the scene of one of Africa's most intractable conflicts.
Asked where the oil money might go, the Commissioner for Uganda's Petroleum Exploration and Production Department, Ernest Rubondo, would not comment on the $50 billion estimate but said: "On the spending priorities... essentially they revolve around creating lasting value through investing on infrastructure and education to create human capacity."
Royal Dutch/Shell executives were taken to task at the company's annual general meeting last week by shareholders for joining in the opposition to the U.S. legislation.
Shell is a founder member of the EITI, but notes in its 2012 revenue transparency report - the second one it has published - that its data "excludes countries whose governments have prohibited or have otherwise indicated that we should not make such disclosure."
Tullow's Thompson said Tullow did not ask permission to publish its data, but simply informed country governments that it was going to do so.

"We don't feel that we are breaching any contracts by making clear the payments we are making. Much of that is in the public domain. All we are doing really is collecting the data and putting it in a form that enables others to use it."

Shell returns to west Africa after failure in east Africa

Royal Dutch Shell is returning its exploration focus to the west African heartland after a second attempt to gain a foothold in massive new gas discoveries off Africa's east coast failed.

The Anglo-Dutch energy company has pulled back from talks with Anadarko Petroleum, aimed at buying a share of its gas discoveries off the coast of Mozambique, because the asking price had risen too high. This follows Shell's defeat last year in a bidding war for one of Anadarko's partners in the discoveries, Cove Energy, which was eventually acquired by Thai oil company PTT Exploration & Production.

Instead, Shell plans to deploy a newly refurbished rig to begin drilling for the first time in deep water off the coast of Benin and Gabon, as well as off South Africa's north-western coast next year.

Instead, Shell plans to deploy a newly refurbished rig to begin drilling for the first time in deep water off the coast of Benin and Gabon, as well as off South Africa's north-western coast next year.

Although the outcome of these efforts is more uncertain than an acquisition, analysts say they may ultimately deliver better value for shareholders. Shell's move is indicative of a broader trend in the industry. Western oil companies are under increasing pressure to find more oil and gas to replenish declining reserves. 

Last year Shell had one of the worst records, replacing just 44% of the oil and gas it produced during the period with new resources.

Kenya Power suspends grid connections

Electricity distributor Kenya Power has stopped connecting new customers to its grid, putting billions of shillings worth of investments countrywide on hold, because of a lack of funds. The Freeze risks derailing the government’s target of raising access rate to 40 per cent of the population by 2020.

The freeze also means that newly-constructed homes and business premises will remain without electricity in the near term or their owners can incur the heavy expenses of diesel-powered generators or solar power kits.

The company, which has connected more consumers to its grid in the last 10 years than it has since independence, said a recent freeze in tariff increment plans has left it without the money it needs to connect new customers.

Kenya Power adds an average of 25,000 users to the grid every month, and currently has 2.1 million customers in its books. In the 12 months to June last year, the power firm added 307,101 new consumers to its network.

Consumers told the Business Daily that the power firm suspended connections in January 2013 and has stopped accepting payments even from applicants it gave quotations to. The government rejected Kenya Power’s bid to double connection charges to Ksh. 70 000 Kenyan shillings (about US 822 dollars) from Ksh. 34 980 Kenyan shillings  (about US 411 dollars) last month. The government's argument is that the increase is unjustifiable considering most of the population is poor and cannot afford that exorbitant fee increase.

The freeze is seen as giving the company a window to hold onto the applications in the hope that it will be allowed to levy the new charges.

Kenya, though an economic powerhouse in East & Central Africa has a lowly connection rate of only 15% of households, that is inefficiently managed by the sole power utility,Kenya Power. 

However, there were indications in the last few days that the government had silently, reversed their earlier directive not to increase the connection tariff. However, its yet to be seen when new connections to the grid will resume.