Africa’s oil scramble heads east to uncertain waters

On October 31, 2011  · In Finance

(Vanguard) Africa’s new scramble for oil is heading east, where the potential could be huge but the risks are far higher than in the well-established sector on the continent’s west coast.

Waters off East Africa have yet to produce a commercially viable oil source but gas discoveries off Mozambique and Tanzania have prompted lots of interest.

On shore, Uganda discovered commercial quantities of hydrocarbons in the Lake Albert rift basin along its western border with Democratic Republic of Congo, and exploration firms including Tullow Oil estimate reserves of up to 2.5 billion barrels with production expected to start in 2012.

“Oil remains the prize in off-shore East Africa. Gas has been found but no commercial oil has been found yet despite increasing evidence for its potential presence,” said Mike Rego, exploration director for Aminex, which is active in the area. This new frontier will be in focus next week at the annual Africa Oil Week conference in Cape Town.

West Africa is a mature oil region that includes the continent’s leading oil producers Nigeria and Angola. Their combined output is about 4 million barrels per day (bpd).

Plenty of reserves likely still lie in deep waters off the steamy West African coast while in North Africa, plunged into popular unrest this year, there are oil reserve holders and producers Libya, Algeria and Egypt, which supply most of their crude to Europe.

But the potential for a new African oil region to the east could have profound implications for global supplies, not to mention economies from Ethiopia to Mozambique.