East African oil & gas boom - who benefits?

Tuesday, 11 March, 2014

We came across a piece yesterday from the Thomson Reuters Foundation that does a nice job of summarising the fear that the unprecedented oil and gas boom currently taking place in East Africa will not benefit the development of the region so much as line the pockets of the “elite.” Given the high news profile held by oil and hags related skulduggery in West Africa in recent weeks it’s a justified fear - perhaps, some might say, a likelihood.

We don’t like to be cynical or take that world-wearily negative editorial line by default though: here it’s based on the words of civil activists from across East Africa, alongside those of diplomats and corporate officials, at briefings in Washington over recent weeks (video and summary of one such event here). The emerging theme: Kenya, Tanzania, Uganda and Mozambique are “running out of time to agree on national policies to develop their newfound wealth in ways that will benefit the lives of their citizens.”

We’ve reported on much of this in recent months as the East African scene in particular has hotted up, and of course the news from West Africa has been hard to ignore, particularly as the breathtaking scale of Nigeria’s oil fraud becomes apparent. For good or ill this is a theme that is likely to be the core of much discussion in the coming years, and possibly one that fundamentally changes the development landscape.

The article is worth a read in full: the writer has spoken directly to several of the more prominent speakers involved, and she also provides an eye-opening précis of the size and promise of East African oil and gas resources as well as a run-through of some of the instability and security issues already created. 

Some extracts:

““Everyone looks at this as a game-changer for the poor, aid-dependent country, and it is a big opportunity,” Ariano Nuvungo, executive director of the Center for Public Integrity in Mozambique, said at a Brookings Institute forum.

“But there is a high risk of corruption in countries where there is one dominant political party and a strong political and economic elite, which poses serious challenges about the extent to which there will be pro-poor development.”

Carlos Pascual, special envoy for international energy affairs at the U.S. State Department, said at the same event that East Africa is at a turning point. Oil and gas discoveries are “radically changing the picture, which is a good thing. But 70 percent of people in resource-rich countries live in poverty,” he said.

If countries are to avoid going down the path of Nigeria or Equatorial Guinea and break the cycle known as the “natural resource curse” - where the rich get richer off oil revenues and the poor sink further into poverty - they must push forward now on governance and transparency measures, he said.”


Some key points:

- More oil and gas has been discovered in East Africa in the last few years than in any other region in the world
- In Tanzania and Mozambique, the offshore natural gas fields are large enough to make them net exporters
- It’s estimated that Uganda’s oil revenues will be worth $2.5 billion a year when oil starts pumping in 2018, outstripping foreign aid and potentially accounting for 50 percent of the government’s budget

- In Tanzania, three people were killed last May in Mtwara and more than 100 arrested in riots in the southern coastal area over the construction of a pipeline to ferry offshore gas to Dar es Salaam. Protestors were demanding a greater share of the gas revenues.
- Kenyan security forces have clashed with rival ethnic groups in the politically volatile northwestern Turkana region, where the U.K. oil company Tullow Oil Plc discovered deposits. More than 10 have been killed and thousands displaced