info.afrindex.com
China-Africa Trade Information Service
info.afrindex.com
China-Africa Trade Information Service
Companies interested in East Africa's hydrocarbons have started putting their capital into countries with proven resources and decent fiscal terms.
The region still offers significant opportunities for investors taking future strategic positions, but it is not attracting attention as a hotspot of oil and gas exploration investment due to declining crude prices.
Data from Oslo-based consulting Rystad Energy shows that capital spending in East Africa by exploration companies was $4.6 billion in 2012, $4.7 billion in 2013, then dropped to $4.3 billion in 2014 and $2.5 billion in 2015 as crude prices declined.
The low price environment has led to a reduced level of activity among industry players, with a crippling effect on countries such as Nigeria and Angola that depended heavily on oil revenues.
PricewaterhouseCoopers (PwC) says governments in East Africa that want to attract oil and gas investors now have to offer an attractive environment by reforming their regulatory, fiscal and licensing systems.
"There seems to be an increased level of awareness on the part of governments and policymakers that they have to play their part in implementing projects as soon as possible," said Chris Bredenhann, PwC Africa oil & gas advisory leader.
Kenya's Petroleum (Exploration, Development and Production) Bill, aimed at creating a new legal and regulatory framework, is being debated in parliament.
PwC's Africa oil & gas tax leader Ayesha Bedwei said Tanzania's regulatory environment is uncertain despite the promulgation of the Petroleum Act, 2015, which allows increased central government involvement, fuelling investor fears of project delays relating to developing liquefied natural gas (LNG) processing plant for natural gas.
While global demand for affordable reliable energy will continue to grow for the foreseeable future, navigating the years ahead will be challenging, as hydrocarbons are no longer as profitable to produce.
"The appetite for exploration has fallen, with companies moving away from higher risk wildcat wells in frontier regions like East Africa," said Alasdair Reid, sub-Saharan Africa upstream research analyst at London-based consulting firm Woodmac.
