East Africa Could Take Leading Role in Oil and Gas Infrastructure Development

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Countries in East Africa are in a position to lead the rest of the continent in developing infrastructure for the nascent Oil and Gas Industry. According to an Ernst & Young (E&Y) report, "Oil and Gas Driving Sustainable Growth," strong growth is expected in associated midstream and downstream infrastructure to accompany sustained growth in Africa's upstream segment.

East Africa stands out because of the massive size of oil reserves in war-torn South Sudan and neighboring Uganda. There are more than 40 trillion cubic feet of gas in Tanzania and about 70 trillion cubic feet in Mozambique. The expected new infrastructural developments cover terminals, storage terminals, storage capacity and critical pipelines and refineries.

"The most significant infrastructure will be in East Africa, where massive liquefaction plants will be needed to liquefy the natural gas for export to global markets," E&Y said in the report. "New infrastructure may be necessary in Nigeria and Uganda, where new production is land-locked as in Chad, South Sudan and Uganda, or to increase refining capacity where current capacity cannot satisfy domestic or regional demand, as in Nigeria and Uganda."

Davis Chirchir, Kenya's Energy and Petroleum Secretary, said earlier this year that the government would soon invite investors to construct an oil pipeline from Lamu to Lokichar's basin in Turkana County at an estimated cost of $3 billion. The basin has an estimated 600 million barrels of oil after Tullow Oil (OTC:TUNOY) (London, England) drilled four exploratory wells. The pipeline will be extended to Uganda, which in February signed a deal with Tullow Oil, Total S.A. (NYSE:TOT) (Paris, France) and CNOOC Limited (NYSE:CEO) (Hong Kong, China) for oil production. It also will extend to South Sudan.

"There are significant challenges that are slowing down rapid development, particularly in terms of infrastructure that typically requires significant amounts of funding," said Elias Pungong, the E&Y's sector leader for oil and gas. "However, the potential rewards and opportunities outweigh these challenges."

The report said that Africa's oil and gas reserves in 2013 had an estimated 228 billion barrels of oil equivalent concentrated in Nigeria, Libya, Algeria, Angola (oil), Sudan (oil) and Egypt (gas). "We expect this trend to continue, mainly driven by Eastern Africa both with proven and exploration assets," Pugong said.

For related information, see February 19, 2014 - Kenya Perseveres with Pipeline Plan to Serve East African Oil Boom, and May 9, 2014 - Uganda Looks to Refinery, Pipeline and Power Projects.

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