China, India guzzling up East Africa’s oil
May 24, 2010

The north and west African states of Nigeria, Angola, Algeria and Libya have long enjoyed the benefits of being Africa’s largest oil producers. But in recent years, oil companies have turned their attention on east Africa, scouring the previously untapped region for more of the precious resource. Oil finds in Sudan and Uganda as well as natural gas deposits in Tanzania and Mozambique have oil companies excited about east Africa for the first time. Uganda’s neighbor, Kenya too is excited about becoming the next oil-producing country, according to Kiraitu Murungi, Kenya’s energy minister thirteen companies are already drilling exploratory wells in the state.

Companies are also prospecting for oil in Ethiopia, Democratic Republic of Congo, Eritrea and parts of Somalia. East Africa is the new west Africa in terms of oil exploration, according to industry leaders.

Government controlled oil companies from both China – China National Offshore Oil Corporation (CNOOC) and India – Oil and Natural Gas Corporation (ONGC) have been vying for a piece of East Africa to feed their oil guzzling countries. China recently outbid ONGC for exploration rights in the Lake Albert Basin in Uganda. London-based Tullow Oil which found the oil in landlocked Uganda’s Lake Albert Basin in 2006 estimates that there are more than 2 billion barrels of oil. Production is due to begin later this year and could hit 350,000 barrels per day by 2015. That would make Uganda the fourth or fifth largest producer in Africa.

In exchange for oil, China usually offers African countries money and infrastructure. “It’s a win-win situation for everyone,” Shi Jicheng, east Africa manager of BGP, a subsidiary of China National Petroleum Corporation told the National. “They get roads here and we get some benefit back in China.”

However, as wealth is drilled from east Africa’s belly, exploratory countries, need to beware of corruption fueling large-scale unrest and rebellion. A political storm is already brewing in Uganda where human-rights and anti-corruption campaigners claim the contracts are structured so that the risk lies largely with the state, while the oil companies moving into the region are virtually guaranteed a return of up to 35 percent on their capital investment. With oil money filling the pockets of only the elite few, analysts worry about the social situation and hope that it doesn’t worsen like in Nigeria, Angola and Sudan.


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