East Africa is new oil and gas hot area

Prospects seem brighter for East Africa as it is now being touted as the region where oil and natural gas abound.  The once hopeless African region could even join the ranks of giant gas exporters in the world and hopefully help bring global crude oil prices to more favorable levels.

“East Africa used to be regarded as an oil industry backwater, a poorer relative of the continent’s resource-rich north and west,” according to the Financial Times.

But that trend has reversed in previous years as oil companies – both large and small – invest financial capital in oil exploration efforts, acquiring oil leases and moving other hard assets to the region.

While the outlook for East Africa is very encouraging, the lack of deep oil rigs could pose a problem. The 2008 recession adversely affected many business sectors and the oil rig production industry was one of them.

Though this has been the situation for the past 4 years, it is still expected to remain so despite plans to invest in oil rigs and create 50 new ones. On the other hand, current oil rig lease rates run up to US$0.6M a day.

One of the first successful oil finds in the region was back in 2006 when Tullow Oil and Heritage oil discovered oil at the Lake Albert basin, within Uganda’s range.

Five years later, in 2011, a major oil find was made by oil exploration firms Anadarko Petroleum Corp. of Texas and Cove Energy of London as they struck natural gas at the Windjammer exploration well, nearly 30 miles from the coast of Northern Mozambique.

By March this year, Eni of Italy declared that it has uncovered substantial gas within miles of Cape Delgado, upping reserves to a minimum of 10 trillion cubic feet.  It estimates that the site may contain some 40 trillion cubic feet of gas or higher up – perhaps to 60 TCF, according to the Financial Times.

Eni is a major partner in Mamba Northeast field of Mozambique and holds a 70 percent stake in the venture.

Both Andarko and Cove’s oil investment in the African region will reach US$150 million as it explores Ugandan oil up until 2014.  Kenya is also next in their list In view of recent oil finds in NW Turkana.

Several other companies had similarly struck oil in Somaliland and Tanzania.

Experts agree that these oil discoveries may eventually tag East Africa as one of the key oil suppliers of China and India, Asia’s major oil consumers.