Kenya Elections Derail Foreign Oil Investments
Throngs of large foreign companies are lured to invest in oil exploration in Uganda, Mozambique, and other countries in Eastern Africa because of the significant oil finds in the region. But, in the case of Kenya, those leading the pact are medium-scale oil players who are easily rocked by political instability issues.
Potential investors are wary that the significant oil finds, coupled with the looming change of hands in Kenyan governance, could give the new leader some upper hand, leading to possible adjustments in oil deals already in existence.
Hassan Hassan, CEO of Simba Energy, said that its oil block in Kenya holds about a billion barrels. It is set to conduct seismic surveys in the area; but he, together with some partners, decided to put everything on hold given the present circumstances.
A group of investors were wary about the Kenyan elections, hinting that one of the strong contenders was involved in human rights abuses some five years ago. Some believe that, had this contender won, imposition of trade sanctions on Kenya wouldn’t be a far-off possibility.
Firms like Bahari Resources had also wanted to invest in Kenya, but chose to defer plans due to political uncertainties. A representative of the firm said that a possible ban on Kenya will cause serious repercussions on its oil business.
Partners in Kenyan oil exploration, Tullow Oil and Africa Oil disclosed that their exploration efforts in Ethiopia and Kenya may have found 20 billion barrels of crude. If estimates prove to be accurate, Kenya could surpass the U.S. in terms of oil reserves ranking. Based on current crude oil prices, Kenya’s reserves may be valued at a hefty $2.6 trillion.
Kenya’s next head of state will be managing a multi-billion dollar oil industry and will have to establish and implement new laws and budget allocation plans, what with the huge investments and oil revenues that may pour into the country.
However, those who have seen the presidential debate in Kenya that aired just last month were a bit anxious. Presidential candidates didn’t seem to have clear cut plans for the country’s oil sector and the anticipated boom.
The existing Petroleum Act needs updating. Much worse is the fact that refineries are in dire straits and strategic pipeline systems are non-existent.
But despite these, oil prospects are encouraging enough that some oil giants can’t wait to get a piece of the action in Kenya.