Lebanon needs to be aware of whether as such, a similar fate awaits it: Despite all the paper oil-and-gas wealth in countries such as Tanzania, Mozambique, Uganda, and Kenya, it wont be easy for East Africa to jump onto an energy bandwagon already crowded with established producers, which is starting to topple with newcomers such as the United States and Australia on board. The world is awash in oil, and crude prices are in free-fall, making tricky and expensive projects in Africa less appealing. And by the end of the decade, the world will enjoy a surplus of natural gas export capacity. Coupled with softening demand, especially in Asia, it all spells bad news for countries hoping to turn untapped resource wealth into glittering riches. The United States, awash in natural gas thanks to the fracking revolution, is steadily ramping up its export plans. Qatar and Australia are also betting heavily on the LNG market. Russian firms like Gazprom and Novatek are eager to grab part of the LNG market. Even nascent gas producers in the eastern Mediterranean want to fill tankers with liquified gas to meet Asias growing demand. The problem is, as more natural gas hits the global market, especially relatively cheap U.S. gas, Mozambique and the like will probably get pinched first; a recent paper for Columbia Universitys Center on Global Energy Policy found that U.S. natural gas exports would dim East Africas prospects. As prices come down in response to the increase in supply from the U.S., various projects start to look less economic, and East Africa gets hit the hardest, Jason Bordoff, one of the papers authors, told Foreign Policy. If the economics are dicey, East African politics are downright hazardous. Although the region wants to avoid the resource curse that has plagued Nigeria and Angola in the wake of their own oil discoveries, regulatory oversight is weak and corruption is still rife, while fiscal terms can be fickle and ever changing. If I had to list five or six major impediments, I would put governance at the top, said Fatih Birol, the chief economist at the International Energy Agency. He said that governments are working overtime to correct the problems because they understand that otherwise it will be very difficult to see an improvement in the economic and social life of these countries. Cash-strapped governments have been eager to extract as much in the way of taxes and royalties as they can from international oil firms; indeed, the latest contracts between Uganda and international companies showed a bigger take for the government. Kenya just announced a new capital gains tax to try to capture more revenue from foreign firms. Theres this sort of creeping government hand into the oil industry as soon as discoveries are made, said the Danish Institutes Patey.
Posted on: Mon, 20 Oct 2014 23:06:06 +0000
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