Energy potential brings rich promise for eastern Africa

Engineers check the damage to an oil pipeline in Heglig, the flashpoint between South Sudan and Sudan. Mohamed Nureldin Abdallah / Reuters

Africa's east coast, once a hunting ground for slave traders and gold merchants, is on its way to becoming a rival to the Middle East as one of the world's largest energy producers.

For years, the region was a backwater in the energy game. Wars, instability and lack of data meant only the hardiest wildcatters would consider exploring an area that runs from Somalia in the north to Mozambique in the south.

While explorers invested time and money elsewhere on the continent, the east was largely ignored. About 20,000 exploration wells have been sunk in North Africa over the past few decades, and 14,000 off the west coast. But to date, drillers have sunk fewer than 500 wells off the entire east coast.

This is quickly changing. A slew of spectacular finds, and the discovery of Soviet-era undersea charts that were meant to help submarines find places to lurk in wait for Cold War rivals, have transformed the hunt.

Robert Bertagne, a principal with Rusk, Bertagne & Associates, a geological consulting firm in Houston that has spent the past decade or so exploring in eastern Africa, says the potential is vast. Test drills indicate about 67 billion barrels of oil or gas equivalent lie under the sea between Mozambique, Madagascar and southern Kenya. He estimates a further 25 billion barrels are waiting to be found farther north.

"This makes the East Africa reserves equivalent to those of Abu Dhabi," says Mr Bertagne, who also spent time in the UAE and discovered Dubai's Fateh field in the 1960s.

The finds have mostly been gas, but Mr Bertagne is confident oil discoveries are not far away: "So far it is only gas - except for Anadarko's Ironclad discovery - but, just as in the North Sea, gas is discovered first, then oil. This is a classical pattern."

In the meantime, the gas deposits are transforming the economies of some of the world's poorest nations. Mozambique's reserves are large enough to turn the impoverished country into a major energy exporter. Tanzania, once the last site of capture for Africa's many slaves destined for sugar plantations, has about 7.5 billion cubic feet of gas reserves.

Perhaps the firmest evidence that this windfall is on the horizon is that the baton is being passed from wildcat speculators to the energy majors. The independent explorer Cove Energy, listed in the United Kingdom, recently put itself up for sale - with its 8.5 per cent stake in the Rovuma Offshore Area 1 off Mozambique, which has potential recoverable reserves of 30 trillion cu ft, the main attraction. Last week, Anglo-Dutch Shell agreed to pay US$1.8 billion (Dh6.61bn) for Cove, beating rival bidders from Thailand and India.

Tullow, another independent listed in the UK, generated mild amusement when it backed exploration in Uganda's remote north-east 10 years ago. But in February it closed a $2.9bn deal to bring in Total of France and CNOOC of China as partners in developing the Albertine Basin, with oil reserves of about 2.4 billion barrels.

What makes Africa's east coast so special, says Mr Bertagne, is a geological fault not unlike that of California's San Andreas fault zone. "This type of geological anomaly is associated with prolific producing basins," he says.

It was the discovery of Soviet-era charts, drawn up to provide submarines with places to skulk on the sea beds, that opened up exploration. During the Cold War, the Soviet Union kept a number of submarines in the area south of Madagascar to intercept western oil tankers, should war break out.

The Soviet navy carried out geological surveys to help submariners safely navigate the ocean floor. These charts were released after the Cold War ended and were used as the basis for energy exploration.

Still, the Indian Ocean rim remains tough country, particularly around the Horn of Africa. Somalia, without a government for 20 years and mired in civil conflict, remains too hot for land-based prospecting. And at sea, Somali pirates pose too great a threat to rigs and survey ships.

The outbreak of hostilities between Sudan and South Sudan, with reports that a key pipeline was damaged in bombing raids on the disputed town of Heglig, will no doubt be an uncomfortable reminder of just how volatile Africa can be.

Still, for a swath of Africa beset by poverty and lack of economic opportunity, the future holds promise as never before.

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