{"id":358,"date":"2014-01-10T12:30:40","date_gmt":"2014-01-10T12:30:40","guid":{"rendered":"http:\/\/oilnewskenya.com\/?p=358"},"modified":"2015-09-02T20:47:46","modified_gmt":"2015-09-02T20:47:46","slug":"oil-deepens-rifts-in-east-africa","status":"publish","type":"post","link":"https:\/\/www.oilnewskenya.com\/index.php\/oil-deepens-rifts-in-east-africa\/","title":{"rendered":"Oil deepens rifts in East Africa"},"content":{"rendered":"

Story by The National<\/a><\/p>\n

In recent years, oil and gas discoveries have established east Africa as one of the world\u2019s most promising frontiers. While the full scale of natural resources in Tanzania, Mozambique, Kenya, Uganda and Somalia remains unclear, early estimates indicate that there is significant potential \u2013 and this has raised public expectation.<\/p>\n

To varying degrees in all four countries, the prospect of petro-dollars has inspired a tug of war between central and regional leaders. The latter, in general, fear that the central government is plotting to keep the bounty for itself (in Somalia, the divisions are more diffuse and reflect the deeper struggle to entrench government of any sort).<\/p>\n

These rifts may lead to instability.<\/p>\n

Below we survey the situation in each of the four countries.<\/p>\n

Kenya<\/b><\/p>\n

Last year, under a newly devolved system of government, Kenya held its first elections to appoint county governors.<\/p>\n

Several campaigns focused on the need to ring-fence the nation\u2019s anticipated oil wealth for the benefit of local communities.<\/p>\n

\u201cThere\u2019s been a huge change under the constitution that decentralises government \u2026 that\u2019s where a lot of this spending pressure is going to come [from],\u201d says David Cowan, Citigroup\u2019s senior economist for Africa. \u201cAll those popular pressures underneath are growing and they will grow more and more. Governments will somehow have to meet that.\u201d<\/p>\n

Some candidates in the county elections addressed fears that oil produced from their region would benefit Nairobi and foreign companies only.<\/p>\n

\u201cThese are the areas that have traditionally been neglected by central government,\u201d says Felix Mutunguti, a geologist at the ministry of energy and petroleum. \u201cWe have to spend a lot of time working with local communities to try to sort this out.\u201d<\/p>\n

The ministry has sent geologists such as Mr Mutunguti to local communities to assess the potential resources and do on-site studies. This gives them valuable insights into residents\u2019 expectations.<\/p>\n

Mr Mutunguti believes that the promise of wealth and jobs was over-emphasised by local politicians, and that it will take years before there is a steady stream of revenue.<\/p>\n

\u201cPeople need to realise that it will be another seven years before they see any of the benefits.\u201d<\/p>\n

Now that county representatives are in office, it has become clear that they possess little power to deliver on their promises.<\/p>\n

Part of the problem is that county governments have had few opportunities to affect energy policy.<\/p>\n

While Kenya\u2019s cabinet secretary for energy and petroleum, Davis Chirchir, says that the current debate around drafting an energy bill \u201cis a fully participatory process\u201d, some observers are not convinced.<\/p>\n

\u201cI don\u2019t think that [county governments] have had much of a say in the energy policy that has been produced,\u201d says Sonal Sejpal, senior legal consultant at the law firm Anjarwalla & Khanna in Nairobi, \u201cbut they are collectively going to appoint [an adviser] \u2026 to deal with oil and gas in their counties.\u201d<\/p>\n

In the bill\u2019s current form, a county would receive 15 per cent of the total amount received by the central government from oil production.<\/p>\n

While tensions are mounting in Kenya, there has been little unrest. However, protests last year at a site in the country\u2019s north-west where Tullow Oil and Africa Oil are operating show how local concerns (in this case regarding employment) can escalate.<\/p>\n

Mozambique<\/b><\/p>\n

A period of relative calm has followed the end of the country\u2019s civil war. It is only in the last couple of years that tensions between Frelimo, the ruling party, and Renamo, an opposition group of militants turned politicians, have grown. Kidnappings and other violence have increased over the past two years.<\/p>\n

That coincides with gas development in the country, suggesting that the emerging sector is a factor in the opposition party\u2019s increased interest in seizing power.<\/p>\n

Heightened security concerns led the mining giant Rio Tinto to evacuate its personnel and their families from its sites in the north of the country in November. A north-south divide between Frelimo, which has maintained control in the south, and the centre and north where Renamo has historical ties, is emerging once again.<\/p>\n

Tanzania<\/b><\/p>\n

Tensions are mounting between mainland Tanzania and the Indian Ocean island of Zanzibar. Both sides are keen to lock in their claims to offshore natural gas in the country\u2019s new constitution, which is being drafted.<\/p>\n

\u201cIf we look at Tanzania, the drawing up of the new constitution at the moment and how to treat Zanzibar\u2019s own claim for offshore oil is going to be fundamental in determining how some of that funding pressure is going to build,\u201d Citigroup\u2019s Mr Cowan says.<\/p>\n

Local representatives in Zanzibar are pushing to exclude oil and gas from the new constitution. They say that Zanzibar stands to lose out if Tanzania controls the exploration and production activities. Tanzanian politicians say that Zanzibar will receive its fair share from the central coffers.<\/p>\n

Zanzibar has drawn criticism from the Tanzanian government for signing memoranda of understanding with Royal Dutch Shell and Ras Al Khaimah\u2019s RAK Gas to carry out exploration activities near the island. Tanzania has declared the agreements invalid, but representatives in Zanzibar maintain their validity.<\/p>\n

Somalia<\/b><\/p>\n

Security issues have long prevented a full appraisal of the country\u2019s natural resources. However, Somalia\u2019s government recently selected Soma Oil & Gas to assess offshore oil and gas potential. In a statement in August, Soma said that the seismic survey agreement was the first in Somalia\u2019s oil and gas industry since the election of Hassan Sheikh Mohamud as president and the appointment of the government last year.<\/p>\n

Improvements to the security situation have focused attention on Somalia\u2019s potential. \u201cIn 2011, the government controlled just a few streets. Now, the government controls all of the ports and almost all major population centres with the exception of one medium size one, which Al Shabaab has,\u201d says Neil Wiggan, the British ambassador to Somalia.<\/p>\n

Piracy rates have also declined.<\/p>\n

In 2013, the number of attacks off the east African coast (both failed and successful) dropped to its lowest level since 2007, according to the International Maritime Organisation.<\/p>\n

Rob Andrew, managing director for Newport Africa Group, a risk-managmement company that provides maritime security services, says that whereas every third pirate attack used to succeed, now the success rate is less than one in 30.<\/p>\n

\u201cThere hasn\u2019t been a significant successful attack on a merchant ship in over a year,\u201d Mr Wiggan says.<\/p>\n

Nevertheless, tribal divides and the threat of attacks by Al Shabab continue to be a source of worry for investors.<\/p>\n

Overview<\/b><\/p>\n

Overall, the speed with which east Africa has established itself as a promising oil and gas frontier has exacerbated many previously dormant regional tensions. Central governments must negotiate a delicate path to ensure that regions where finds are made feel the benefit of the resources, while also delivering benefits to their countries as a whole. The risk is this: the more there is, the more there is to fight over.<\/p>\n","protected":false},"excerpt":{"rendered":"

Story by The National In recent years, oil and gas discoveries have established east Africa as one of the world\u2019s most promising frontiers. While the full scale of natural resources … Read More<\/a><\/p>\n","protected":false},"author":2,"featured_media":36,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[7,11],"tags":[70,3557,671,925,1252,1636,1827,2126,2195,2278,2352,2466,2565,2603],"class_list":["post-358","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-oil-politics","category-top-news","tag-africa-oil","tag-conflict","tag-east-africa","tag-frelimo","tag-kenya","tag-mozambique","tag-oil","tag-ras-al-khaimahs-rak","tag-royal-dutch-shell","tag-seismic-survey","tag-somalia","tag-tanzania","tag-tullow","tag-uganda","entry"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2013\/12\/toil.jpg?fit=286%2C176&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p5JWkQ-5M","jetpack-related-posts":[{"id":2798,"url":"https:\/\/www.oilnewskenya.com\/index.php\/4th-oil-gas-africa-intl-trade-exhibition-set-nairobi-fortnight\/","url_meta":{"origin":358,"position":0},"title":"4th Oil & Gas Africa – Int’l Trade Exhibition set for Nairobi in a fortnight","author":"","date":"April 13, 2015","format":false,"excerpt":"The\u00a04th Oil & Gas Africa \u00a0Intenational Trade Exhibition that hopes to attract leading oil, gas and petroleum companies from around the world will be held 27th to 29th April 2015. 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