Is East Africa the ‘New Frontier’ for Oil and Gas Exploration?
23 March 2012
AFRIbiz - March 20, 2012
One conclusion drawn from the annual ‘Africa Oil Week’, held in Cape Town, South Africa, between 31 October and 4 November 2011, was that the East African region holds great potential for investment opportunities within the oil and gas sector. The beleaguered East African region has been plagued by on-going political unrest and widespread violence, which have hindered the development of a productive oil and gas sector. This has resulted in a decreased risk appetite amongst foreign investors.
This discussion paper will address the evidence that has surfaced which suggests that this trend is reversing, and that the East African region is experiencing significant growth in investment from foreign companies keen to profit from the area’s potential. This shift has led to the portrayal of the region as the ‘new frontier’ of oil and gas opportunities. The question remains, however, whether the East African region, in spite of its volatile security environment, has the potential to live up to this image in 2012. If it can surmount certain obstacles, East Africa could become a major global focus for the oil and gas sector, with major consequences for the region.
The risks and obstacles of investing in East Africa
The idea that East Africa presents itself as the ‘new frontier’ for oil and gas opportunities stems from the fact that currently little is known about the geography of the area, with a lack of seismic data and geological knowledge, compared to the much greater explored West Africa. Executive Chairman of Britain’s Cove group, Michael Blaha, has stated that there have only been 500 oil wells drilled in East Africa, compared with 15,000 in the established hydrocarbon province of West Africa, and 20,000 in North and Central Africa. Due to this current under-exploration, the East African region accounts for a mere 1.5% of oil wells drilled on the African continent as a whole.