East Africa likely to become top energy producer in continent, states IHS report

oil-daanfrakken-flickrEast Africa has had the highest number of gas discoveries between 2010 and 2013. (Image source: Daan Frakken/Flickr) A study by IHS Energy has stated that East Africa is likely to produce one million barrels of oil equivalent per day by 2025, with Mozambique and Tanzania leading production

The region has registered the highest number of gas discoveries between 2010 and 2013, accounting for more than 25 per cent of added reserves worldwide. Having acquired over 50 per cent of the total value of regional mergers and acquisitions in 2013, East Africa is also the largest financial contributor in the continent, added the study.

Stanislas Drochon, director of Africa oil and gas at IHS Energy, said, “East Africa is the new hot spot. The region is going through a major transformation – it has huge potential to play a crucial role in driving the region’s future growth, while still operating in a risky business environment where regulatory framework and infrastructure are not in place.”

Dominance of Mozambique and Tanzania in oil production
Despite the challenges, Mozambique and Tanzania have registered the region’s most significant gas discoveries, with more than 80 per cent of them in Mozambique. However, there is more to be discovered, including in other countries such as Ethiopia or Comoros. Within the next decade, East African countries are expected to deliver the highest hydrocarbon production – accounting for nearly one million bpd and driven by LNG projects in Mozambique and Tanzania, according to IHS Energy. By the end of the decade, Uganda is also expected to contribute to this growth.

Rise of LNG and gas production
According to Natznet Tesfay, head of Africa at IHS country risk, gas and LNG production will become a dominant revenue generator in East Africa. The accelerated growth in the gas sector will outsize the previously important coal sector, but it is unlikely to witness an immediate increase in employment opportunities and local supply chain expansions. The massive investment, followed by the infrastructure boom, will transform the northern Mozambican provinces, allowing the local governments to get involved. This will facilitate and attract the entry of foreign investors, exploring opportunities in the energy sector, as well as chemical, power, manufacturing and mining.

An open environment for investment
According to the IHS Petroleum Risk Manager Indicator, 26 out of the 71 countries, rated with a top score for international openness to investment, are located in sub-Saharan Africa. There is accessibility to foreign investment, even in new onshore and offshore frontiers such as Tanzania, Mozambique and the Rovuma basin.

East Africa has grown from accounting for a negligible share of mergers and acquisitions prior to 2009 to eventually overtaking West Africa in 2013. Since 2010, deals in East Africa have been focused on three countries – Mozambique, Tanzania and Uganda, with some emerging M&A activity in Kenya. The top three deals in the region were in Mozambique, with transactions done by Asian-based national oil companies (NOCs).

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