Oil and gas discoveries in Africa: The implications
by Prof. E. Kiremire
17-08-07
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 mm 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 which will invest $ 80 mm in the
vital project. Clearly, this is very exciting news.
This reinforces the existence of Kudu gas (worth $ 1 bn) in the Karas
Region. It is estimated that thisgas 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 atthe 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 and 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 $
110 mm 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 and 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, sulphuric 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) to 18 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 mm 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), the 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 the
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 mm bpd. It
is followed by Algeria No. 2, (2.1 mm), Libya 3, (1.8 mm), Angola 4, (1.4
mm), Egypt 5, (0.579 mm), Southern Sudan 6, (0.4 mm), Equatorial Guinea 7,
(0.33 mm), Congo Brazzaville 8, (0.280 mm), Gabon 9, (0.237 mm), 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‚
that has already afflicted some oil producing countries of the periphery.
Apparently, this is a condition in which the oil wealth gets stuck at the
top narrow stratum of the society and very little or nothing at all
percolates to the wider bottom stratum of the society.
I find this term, which I would equate to the “slim disease”‚ particularly
interesting. As we all know, the slim disease term was developed in Uganda
to refer to the HIV/AIDS virus disease. This virus attacks its victim and
siphons out its nutrients for its well-being, replications and mutations at
the expense of its victim.
The victim consequently becomes smaller and smaller until he dies. Mutations
mean that the virus has capacity to change and resist any unwanted external
influence including drugs. Likewise, the OilSlim Disease weakens its victim
economically until the entire nation is in total ruins.
Hopefully, the potentially oil producing African nations will not be a
victim of this disease.
Major blessing
-- Oil can be a major blessing when put to good use. There are some success
stories. For instance, Libya has used its oil wealth to strengthen its
industrial base.
Bahrain has built complex structures such as hotels, etc. on the reclaimed
land from the ocean. They have also developed technologies to obtain
drinkable water from the ocean. Many universities and research centres have
been established in a number of Arab nations.
Not only has Iran developed its industrial base, but also a vibrant uranium
enrichment programme that has made her earn the title “terrorist” and a
label “member of the axis of evil”.
The question is, will the oil-producing African countries survive these
labels in future?
Secessionist tendencies
-- In some countries, those regions with oil tend to possess secessionist
aspirations. Nigeria’s Biafran story is still fresh in our minds. According
to some media reports, the area in which the oil has been discovered in
Uganda is gazetted as a Game Reserve despite the encroaching settlements.
Against this, a claim has emerged that the same area is an “ancestral land
of worship”. Could the presence of oil in Bunyoro near Lake Albert in Uganda
subsequently trigger off secessionist tendencies, as was the case of
Nigeria’s Biafra?
Suppose more substantial discoveries of oil are found in northern Uganda and
Buganda regions, could these catalyze the tendencies for federalism or
secession in Uganda or elsewhere in Africa where oil has been discovered?
-- Development of towns in the vicinity of oil regions. For instance,
will Buseruka trading centre near the oil area in Uganda grow to become a
city in the next 50 years or so?
-- Security concerns of the oil regions. Peace and security are an essential
prerequisite to any form of social and economic development.
It is therefore extremely important that those regions in which oil or gas
discoveries have been made are well protected to ensure that oil or gas
production is not disrupted.
-- Intensification of skills training for oil exploration and extraction is
extremely important. Thus, geology disciplines must be promoted.
-- Promotion of disciplines linked to the petroleum-based chemical industry
must be introduced in universities of those African countries in which oil
has been found.
-- Promotion of key industries such as steel and aluminium;
-- Intensification of both basic and high technology research, which may
include nanotechnology, high level computer programming, and engineering;
-- Introduction of material science disciplines in universities; and,
-- Promotion of disciplines such as chemical and genetic engineering. The
list is endless.
Finally, Science and Technology (S+T) has a much longer life span than
oil.
For instance, Bill Gates who started Microsoft with a bare $ 5,000 in the
early 70’s is now worth $ 56 bn (8 times Ugandan estimated oil reserves).
All this goes to underpin the value of investing in S+T in Africa.
Let us thank our God for blessing Africa with the most golden commodity and
continue to pray that He will bless us with more oil and that His guidance
will ensure that it will benefit the entire continent.
Prof. E.M.R. Kiremire is Dean, Faculty of Science, University of Namibia
(Unam), ekiremire@unam.na
Source: www.newera.com.na
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