East Africa is world's new energy frontier

April 12, 2012 at 3:11 PM   |   Comments

MAPUTO, Mozambique, April 12 (UPI) -- Not long ago the ramshackle former Portuguese colony of Mozambique on the east coast of Africa was written off as a basket case.

Now it's on the cusp of energy riches as the region becomes the world's hottest oil and natural gas zone and is likely to become a major gas exporter.

"East Africa used to be regarded as an oil industry backwater, a poorer relative to the continent's resource-rich north and west," the Financial Times observed.

"That's changed over the past 12 months as majors and independents invest hundreds of millions of dollars in exploration and compete to snap up licenses on the continent's last hydrocarbon frontier."

Indeed, the region's energy boom's so great the main impediment is a shortage of deep-water rigs. This is due to a drilling boom and a downturn in production of new offshore rigs during the recession that began in 2008.

Industry sources say 50 new rigs are planned but the shortage is expected to persist for some time with charter rates hitting $600,000 per day.

Tullow Oil, a London wildcatter, and Britain's Heritage Oil got the ball rolling in 2006 when they struck oil in Uganda's sector of the 3,500-square-mile Lake Albert rift basin which extends into the Democratic Republic of Congo.

They plan to extend exploration to the East African rift basins of Kenya, the region's biggest economy, and Ethiopia in 2013.

The Lake Albert field contains an estimated 1 billion barrels of oil, making it the biggest onshore field found in sub-Saharan Africa in two decades.

In March, Tullow sold one-third of its interest in its Uganda blocks to the China National Offshore Oil Corp. for $1.467 billion. CNOOC and France's Total plan to spend several billion dollars on developing the field over the next few years.

But things got really turned around in February 2011 when Texas company Anadarko Petroleum Corp., one of the world's largest independent oil and gas outfits, and Cove Energy of London hit natural gas at their Windjammer well in the Indian Ocean off Mozambique, where exploration is most advanced.

Two other strikes quickly followed, giving them an estimated 12 trillion cubic feet of gas, or 2.1 billion barrels of oil equivalent. The field could contain up to 30 tcf.

Italy's Eni, lead partner in Mozambique's offshore Mamba Northeast field, announced a new giant gas discovery March 26 that boosted reserves there to at least 10 tcf.

Eni says the field off Cape Delgado holds a potential 40 tcf of gas. The Financial Times said the Mozambique fields could contain up to 60 tcf.

Anadarko and Cove are spending $150 million on exploration in Uganda over the next two years and looking to expand into Kenya, where oil was discovered this year in the northwestern Turkana region.

These finds, spearheaded by Tullow and its Canadian partner Africa Oil Corp., showed strong indications the oil-bearing strata runs into Ethiopia, where exploration is getting under way.

Africa Oil Corp recently hit pay dirt in Puntland.

Australian explorer Jacka Resources has moved into the Habra Garhajis block in southwestern Somaliland, which declared its independence in 1991 and has enjoyed relative stability despite the Somalia bloodletting, to start exploration work.

Norway's Statoil made a major gas find off Tanzania, Mozambique's northern neighbor, in February, with reserves estimated at 5 tcf. That's the biggest find so far in Tanzania, which will auction off 16 offshore oil exploration blocks in September, with the process due to close in 2013.

Africa-focused Ophir Energy and the BG Group of Britain, the largest supplier of liquefied natural gas to the United States, have recently made significant gas finds off Tanzania.

Meshack Kagya, top geologist with the state-run Tanzania Petroleum Development Corp., said the country's gas reserves stand at 10 tcf and are expected to grow.

The gas finds are expected to establish the region as a key hub for supplying the energy-hungry Asian market, particularly China and India.

LNG shipments will go directly across the India Ocean from Kenya's Mombasa and other ports that are expected to be constructed as the energy boom transforms East Africa's economies.

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