Oil & Gas Discoveries in Africa – The Implications

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By Prof. E. Kiremire

Relatively recently, oil and gas discoveries have been announced in more than ten African countries. These include Uganda, Ghana, Congo-Brazzaville, Angola, Gabon, Guinea-Bissau, Guinea, Sierra Leone, Algeria, Egypt, Cameroon, Nigeria, Tanzania, Zambia, Namibia, Sao Tome and Principe. This is great news for our continent.

I have been following this news with keen interest, which surprisingly, to date, accounts for a colossal 2 million Internet hits plus. There has been excitement both within and outside the countries concerned.

The discovery of oil in Namibia was published by New Era of 13/07/07.

According to the article, the discovery of oil along the Namibian coastline was announced by Dr Khalin Valentine Vladimirovich – a representative of a Russian company Sintezneftegaz Namibia (Ltd) which will invest US$80 million in the vital project.

Clearly, this is very exciting news.

This reinforces the existence of Kudu gas (worth US$1 billion) in the Karas Region. It is estimated that this gas could meet Namibia’s energy requirements for the current entire century.

In the case of Uganda, the discovery of oil on the shores of Lake Albert in Bunyoro District by Heritage Oil and Gas of Canada, Hardman Resources of Australia and Tullow Oil of Ireland has attracted wide and varied reactions from across sections of society both within and outside Uganda.

These include government ministries such as Energy, Foreign Affairs, Investments, Finance, etc., as well as quasi government institutions such as Bank of Uganda, Uganda Wild Life Authority, the National Environment Management Authority, just to mention a few.

Public interest in this development has been so great that high ranking government officials that include Vice-President, Prof. Gilbert Bukenya and some ministers have already visited the drilling sites.

In the meantime, the oil companies that have invested heavily in the Ugandan discovery have already started reaping huge financial benefits as their market value has since increased at the stock exchange.

Of particular interest are policy formulation steps that have already commenced. A recent 2-day workshop that was held by government agencies at Windsor Lake Victoria Hotel, Entebbe to review a draft paper on Oil/Gas Policy, among other important issues, covered the future promotion, development, production, transportation, refining, distribution, marketing and sale of oil and gas in the country.

Plans are already underway to build a Uganda-Kenya pipeline at a cost of US$110 million and a refinery to supply fuel for energy production.

Other positive expressions of interest have also come from some sub-regional and regional organizations such as NEPAD and the Pan-African Parliament.

All in all, all of a sudden, Uganda’s name has hit the regional and international limelight like a wild fire. Similar excited reactions have taken place in other African countries in which oil/gas have been discovered.
But what is so unique about oil?

The most obvious reason is that oil is probably the most sought-after commodity in the world, even more so than the famous modern-time gold.
About two centuries ago, gold was so highly regarded that European explorers travelled long journeys by ship abroad in its search. This led to subsequent land conquests and occupations.

Today, oil seems to have directly or indirectly taken the place of gold. In fact, it is sometimes referred to as black gold.

As we are all aware, this oil is so vitally important that any price fluctuations especially in the upward trend drastically affects the world economy negatively.

This impact is severely felt by developing nations.

The oil crises of the early and late 1970s (1973 & 1979) that led to world economic recessions are cases in point.

Currently 84% of oil is utilized in energy consumption and production in the form of gasoline, diesel, jet fuel, heating, petrol, liquefied petrol gas, and other fuel oils. The balance (16%) is used for the chemical industry to produce organic solvents, fertilizers, pesticides, pharmaceuticals and plastics and so on.

Another key industrial chemical, sulfuric acid, is obtained as a by-product. Thus, a strong chemical industry is a powerful catalyst for industrialization.

And the economic potential of petroleum is enormous. In actual fact, developed nations have categorized oil as a great security concern. So what is petroleum and how is it obtained?

The name petroleum comes from two Latin words, petra (rock) and oleum (oil). Hence, scientifically speaking, petroleum simply means rock oil or oil from rocks – itself an appropriate term since oil is usually obtained by drilling through rocks.

Petroleum comprises of a mixture of hydrocarbons (a hydrocarbon consists of carbon and hydrogen atoms) with chain lengths ranging from 5 carbons (C-C-C-C-C) to18 carbons (C5H12 to C18H38).

Petroleum hydrocarbons of molecules smaller than C-5 are known as natural gas or natural gas liquids.

Petroleum hydrocarbons with chain length greater than C-18 are known as paraffin wax.

According to a Biogenic Theory, petroleum was formed a long time ago (some 180 – 140 million years) by the reaction of heat and pressure (in the ground) on the organic matter mainly from algae and small sea animals (zooplankton).

Since most of the hydrocarbons are lighter than rocks or water, they drifted upwards through the rocks and in the process some got trapped in the space between rocks and produced reservoirs of petroleum. A bit of petroleum permeated to the surface of the ground and decomposed.

There exist three categories of oil extraction, namely, Primary methods, Secondary methods and Tertiary methods.

The primary methods use underground pressure to recover about 20% of oil. When that oil component is exhausted, then the secondary methods are applied to recover a further 5-10% of oil. Finally, the tertiary methods that employ reduction of viscosity techniques are utilized to recover some more oil.

According to President Museveni, Ugandan oil is of very high quality, with 33 API (American Petroleum Standard) units, a position that places it in the second slot, next to North Sea Oil pegged at 42 API units. Venezuela oil stands at 18 API units.

Apart from ranking oil according to an API index, it can also be ranked according to nations. Thus, in production terms, Saudi Arabia is number 1, followed by Russia (2), USA (3), Iran (4 – OPEC), Mexico (5), China (6), Norway (7), Canada (8), Venezuela (9 -OPEC), United Arab Emirates (10 -OPEC), Kuwait (11- OPEC), Nigeria (12 – OPEC), United Kingdom (13), Iraq (14 – OPEC).

In terms of oil exports, again Saudi Arabia dominates, followed by
Russia (2), Norway (3), Iran (4 – OPEC), United Arab Emirates (5 -OPEC), Venezuela (6 – OPEC), Kuwait (7 – OPEC), Mexico (9), Algeria (10 – OPEC) and Libya (11 – OPEC).

The United States of America (USA) is the greatest importer of oil. It is followed by Japan (2), China (3), Netherlands (4), France (5), South Korea (6), Italy (7), Germany (8), India (9), Spain (10), United Kingdom (11), Belgium (12), Canada (13) and Turkey (14).

It is interesting to observe that the leading importers of oil are simultaneously the most industrialized nations. They include the heavy producers of petrol.

In terms of oil consumption, the USA once again tops the list, followed by China (2), Japan (3), Russia (4), Germany (5), India (6), Canada (7), South Korea (8), France (9), Italy (10), Saudi Arabia (11), Mexico (12), UK (13) and Brazil (14).

The 8-top most non-oil producing countries that consume the World’s most oil have also been classified with Japan as number 1, followed by Germany (2), India (3), South Korea (4), France (5), Italy (6), Spain (7) and Netherlands (8).

So, what will be the ranking in oil production in Africa in 2009 when Ghana and Uganda commence their productions? Obviously Nigeria (Africa’s oil giant) is number 1, producing 2.2 million barrels per day. It is followed by Algeria No. 2, (2.1 million), Libya 3, (1.8m), Angola 4, (1.4m), Egypt 5, (0.579m), Southern Sudan 6, (0.4m), Equatorial Guinea 7, (0.33m), Congo Brazzaville 8, (0.280m), Gabon 9, (0.237m), Cameroon 10, (82,300), Ghana 11, (72-75,000 potential production), Cote d’Ivoire 12, (32,900), DRC 13(21,090), Uganda 14, (14,000 potential production), and Benin 15, (700).

World Oil Life Span

Theoretical models regarding the life span of the current oil reserves have been advanced. According to these models, the world’s oil reserves will be depleted within the next 30-40 years. This is an extremely worrying situation as the modern economy, especially the heavily industrialized nations, greatly depend on oil. What will, then, happen when, in the last years of the first half of this century, the world oil reserves become less and less? Who will be the super power?

Clearly those nations with good oil reserves and a good base of technology will have a major influence in world politics. This inevitably sets the trend of current international politics.

Great Oil Producers

The most industrialized countries which are great oil producers are, at the same time, great importers of oil. Undoubtedly, this implies a large measure of oil hoarding. Oil is being imported by those countries and kept away for the rainy day.

The heavy importers and consumers are mainly the industrialized and highly developed countries (countries of the North) while the rest belong to the South category.

Using the Centre-Periphery theory, the greatest importers and consumers belong to the Centre and the rest belong to the Periphery. Thus, the oil resources like any resource flow towards the centre where there is a high density of science and technology.

Competition-Coalition principle

The Competition-Coalition principle of the centre will be greatly intensified. This means that there will be an intense competition for the limited oil resource by the nations of the centre and at the same time they will closely unite to fight any influence that threatens or appear to threaten their access to this limited resource.

This explains the roles of the coalition forces during the Kuwait-Iraq war of 1900-1991 and the current Iraq and Afghanistan wars.

This competition-coalition principle is not new. It was at work during the Berlin Conference of 1884 when the bitter rivalling European nations got together and decided to amicably share the cake of the African continent – a legacy we live with today.

The double standard approach is a tendency by the Centre to apply a double standard approach in dealing with issues of the Periphery. For instance, whereas human rights and genocide issues were not a major priority during Uganda’s Idi Amin and Mobutu’s Zaire or the Rwandan genocide, these have become a great concern in the case of Sudan’s Darfur, Iraq and Iran.

Divide and Rule

The application of the Divide and Rule principle – The internal and external cohesion within the nations of the Periphery could threaten the economic interests of the Centre. That is, the steady flow of vital resources (including oil) from the Periphery to the Centre may be threatened by the periphery cohesion. Thus, there is a tendency for the centre to encourage division rather than unity of the periphery. This perhaps explains why OPEC could not work in unison during the 1973 and 1979 Oil crises.

Intensification of Research

Intensification of research and development (R+D) by the centre to find alternative sources of energy has already reached an advanced stage. For instance, the production of cars that will use hydrogen from alternative sources such as water and coal right here in Africa, and South Africa’s Sasol which produced 1/3 of her oil needs from coal during the oil embargo.

Protection

There is protection and intensification of science and technology by the centre which conducts high technology research and protects its transfer to the periphery through various means including patents. This widens the gap between the centre and periphery more and more.

This monopolization of science and technology is very much reflected in preventing the periphery from conducting experiments regarding nuclear enrichment or developing nuclear weapons while at the same time the centre enjoys all the rights to do so.

Implications

What then are the implications of the oil discoveries in Africa?

– World focus on Africa will become more intensified. The scramble for economic spheres of influence will be more directed to those countries with oil.

– The African nations with newly discovered oil/gas may become a member of OPEC.

– The economic and political developments of those oil nations will be more closely monitored by the centre to ensure that they do not develop what may be classified as Weapons of Mass Destruction (WMD) or harbour any labelled ‘terrorist’ elements.

– The international image of African countries with new oil discoveries is likely going to be boosted, just like Africa’s oil giant (Nigeria) and Africa’s mineral giant (South Africa) which are regular invitees to the G8 meetings.
Dutch Disease

– The ‘Dutch Disease’ or the ‘Oil Slim Disease’. Commenting on the oil discovery in Uganda, one writer talked about the so-called Dutch Disease

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