Newly Found Oil Reserves may break the Cycle of Oppression due to Poverty and Corruption in East Africa

Posted by PITHOCRATES - April 15th, 2012

Week in Review

East Africa is plagued by poverty, political corruption, lack of infrastructure, poor health conditions, AIDS epidemics, high infant mortality rates and everything else that goes with impoverished, corrupt countries.  Somalia is home to pirates that are the scourge of the high seas.  Ethiopia’s recurring famines are well known.  Uganda had Idi Amin.  Who terrorized his people with murder, rape and torture.  South Sudan came into being after a bloody civil war.  Where tribal civil wars continue within the new South Sudan.  As they do throughout much east Africa.  Because there are no advanced economies to support a prosperous middle class.  Just a ruling elite terrorizing the impoverished masses who survive on subsistence farming.  But that may all be changing (see Eastern El Dorado? posted 4/7/2012 on The Economist).

IN ENERGY terms, east Africa has long been the continent’s poor cousin. Until last year it was thought to have no more than 6 billion barrels of proven oil reserves, compared with 60 billion in west Africa and even more in the north. Since a third of the region’s imports are oil-related, it has been especially vulnerable to oil shocks. The World Bank says that, after poor governance, high energy costs are the biggest drag on east Africa’s economy.

All that may be about to change. Kenya, the region’s biggest economy, was sent into delirium on March 26th by the announcement of a big oil strike in its wild north. A British oil firm, Tullow, now compares prospects in the Turkana region and across the border in Ethiopia to Britain’s bonanza from the North Sea. More wells will now be drilled across Kenya, which also holds out hopes for offshore exploration blocs.

President Obama continually tries to tell the American people that we have the smallest oil reserves in the world yet we consume the lion’s share of the world’s oil production.  But that’s not true.  There’s a lot of oil out there.  But you have to drill first to find it.  And until you do you can’t prove these reserves.  So no one counts them.  Including our president.  But it doesn’t stop anyone from looking for oil and natural gas.  If they are not forbidden to do so.  Like they are in America wherever the government has a say in the matter.  People once thought east Africa had no energy.  But it didn’t stop them.  Who believe in the policy of ‘drill baby drill’.  And in ‘drill and ye shall find’.  Which they did.  And they found.  Oil and gas all over that once thought barren land.  Because they just kept drilling, baby.

Kenya’s find raised less joy in Uganda, where oil was first struck in 2006…

South Sudan, for years the largest oil producer in the region and locked in an oil dispute with Sudan, now wants to send crude out through Kenya on a pipeline to a proposed new port in Lamu (see map). Such a channel could also serve Ethiopia, which shares Kenya’s joy about their joint oil prospects. But their winnings pale next to those farther south. Tanzania has done well out of gold, earning record receipts of $2.1 billion last year, a 33% increase on 2010. It will do even better from gas. The past month has seen the discovery of enormous gasfields in Tanzanian offshore waters. That of Britain’s BG Group is big, Another, by Norway’s Statoil, is bigger. Statoil’s recent gas find alone is estimated to hold almost a billion barrels of oil equivalent (boe).

Happily, Tanzania’s gasfield extends south to Mozambique, where Italy’s Eni last month unveiled a find of 1.3 billion boe, matching similar finds by an American firm, Andarko. With plans to build a liquefied natural gas (LNG) terminal, Mozambique could be a big exporter within a decade. At least the vast and impoverished south of Tanzania and north of Mozambique will be opened up to much-needed investment.

Oil and natural gas everywhere.  Finally a chance for these impoverished lands to develop a middle class.  Who can develop a rule of law.  And government of the people by the people for the people.  Like in all Western countries.  Where the quality of life and life expectancy is higher than in these impoverished east African countries.  Which they can have, too.  If they harness their energy resources.  Create jobs.  And provide the energy a modern economy requires.

Yet the region is not just excited about fossil fuels; a parallel push towards alternative energy is under way. Several east African countries are keen to realise the Rift Valley’s geothermal prospects. One of the world’s largest wind farms is being built in Kenya not far from the new-found oil in Turkana. Its backers say it will produce 300MW, three times the total output of Rwanda.

That is a drop in the bucket for Ethiopia. Its rivers, plunging from well-watered highlands into deep canyons, have hydropower potential. Meles Zenawi, the prime minister, has ordered the construction of a series of dams at a total cost of over $8 billion. The jewel is the $4.7 billion Grand Ethiopian Renaissance Dam on the Blue Nile. This should generate 5,250MW when finished, increasing electricity production in the country fivefold, providing a surplus for export and allowing Ethiopia to open up as a manufacturer.

Wind farms.  Well, when you have no energy that 300 mega watts will be a lot.  But when they build that dam which will produce 5,250 mega watts they can shut down those novelty wind mills.  And put that land to better use.  Perhaps building better homes for that budding middle class.  Businesses.  And schools.  For that dam will be able to modernize their infrastructure.  And bring electricity, and the modern conveniences we all take for granted, into their homes.  Including cable TV.  The Internet.  And smart phones.  Things few subsistence farmers enjoy.

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