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EAST AFRICA’S OIL BREAKTHROUGH; WILL IT BE THE USUAL TALE OF FOREIGN CAPITALISM AMIDST LOCAL STATE OF DISCORD & DISARRAY?

I’m sure You have heard the phrases “Curse of Oil” the “Dutch Disease” or the “Resource Curse”. Basically this is the Paradox of plenty where naturally wealthiest Countries are usually the most destitute, oppressed and underdeveloped Home to  some of the poorest and most depressed People on Earth. This is characteristic to

Oil is the Lifeblood of the World’s Economy

all naturally wealthy Nations especially in Africa and even across the World.

Oil in itself is historically quite a delicate and hotly contested Resource and Matter. Oil is the World’s largest and most important source of Energy; Essentially Oil is the Engine or rather the Lifeblood of the Global Economy. The World’s biggest Economies which also happen to be the most industrialized and powerful Nations primarily rely on Oil to run and manage their dynamic Economies which explains why they happen to be at the Center of every Single Oil Block and Oil Well across the World.

China which is currently the most industrialized Nation in the World produces 3.8 Million Barrels of Oil daily; In turn it consumes 13 Million Barrels of Oil daily. The U.S.A which is the World’s biggest Economy produces 13.1 Million Barrels of Oil daily; In turn it consumes 19 Million Barrels of Oil daily. Africa as a Whole produces 9 Million Barrels of Oil daily; In turn it only consumes 4 Million Barrels daily.

Note: 1 Barrel equals 159 Litres.

Before I introduce you to East Africa Oil breakthrough let us have a moment of Silence for the Republic of Venezuela which has the World’s largest Oil Reserve with a whopping 303 Billion Barrels of Proven Oil Reserve and the Republic of Libya which has the largest Oil Reserve in Africa  with 48 Billion Barrels of Proven Oil Reserve.

The Relationship Between Oil,Peace and Prosperity

Libya is still embroiled in Civil War since 2011 with Venezuela now teetering to a Civil War. We must not forget the Oil War and Unrest experienced/being experienced in Iraq, Syria and Niger Delta in Nigeria. All these boil down to the Oil Question and Control happening under the guise of Political Power Struggle under the Machinations of Giant Foreign Capitalists and Imperialists.

The 1st of August 2019 Announcement by Kenya’s President Uhuru Kenyatta that Kenya has now joined the League of Oil exporting Countries in the World with an initial Consignment of 200,000 Barrels of Crude Oil Export valued at Ksh.1.2 Billion has elicited mixed reactions, responses, emotions and expectations across the Country as Kenyans seek and try to interpret, understand and make sense of what this News actually means. Discovery of Commercial Oil in any Country is usually expected to lower the means and cost of production which directly translates to low Cost of Living and improved Standards of Living to its Citizenry.

The discovery of Viable Oil in Kenya was made in 2012 making it the Second East African Nation with Proved Oil Resource after Uganda who discovered theirs in 2006 and South Sudan whose first Oil Block was discovered in 1978 long before its Independence from the main Sudan.

Impeccable Reports have it that Kenya has over 1 Billion Barrels of Proven Oil Reserve and 750 Million Barrels of Recoverable Oil or Commercially Viable Oil within Turkana area. The main developers in this Project being Britain’s Tullow Oil Company alongside France’s Total and Canada’s Oil Corp Companies who are currently extracting 2000 Barrels daily with Production Sharing Agreement remaining a Top Secret between Kenyan Government and the Developers as maintained by Petroleum and Mining Minister John Munyes until August 16,2019 when the Kenyan Government finally revealed its deal with a UK-based China Oil Refinery Company (ChemChina UK Limited) who bought the first Crude Oil Export Consignment flagged offf on August 26,2019 by President Kenyatta at the Port of Mombasa. Uganda on the other hand has 6.5 Billion Barrels of Proven Oil Reserve and 2.2 Billion Barrels of Recoverable/Commercially Viable Oil with its main developers being Britain’s Tullow Oil alongside China’s CNOOC, France’s Total and Italy’s Saipem SPA Companies. Uganda is yet to start extracting Commercial Oil due to Disagreements with developers over Taxation and Production sharing Agreement. South Sudan who have only explored 30% of their Total Oil Potential currently has 3.5 Billion Barrels of commercially Viable Oil. It’s currently producing 165,000 Barrels daily down from 350,000 Barrels that it used to produce shortly after its Independence in 2011-2012 before the ongoing Civil War/Unrest that broke out on December 2013. The main developers of Oil here are China, India, Malaysia with Russia and France also expressing their Interests.

The real Discord, Disarray and Disaster is in how these Three Oil Nations in East Africa do or intend to do with their Crude Oil in terms of Refinery, Value Addition and Value Proposition.

With East Africa’s Sole Oil Refinery Plant KPRL (Kenya Petroleum Refineries Limited) in Changamwe-Mombasa Kenya inoperative since 2013 with all efforts to Revive and Modernize it Vain; Kenya like South Sudan has started its Oil Business with exporting Oil in its Crude form.

Kenyan Government Officials seem to be reading from different Pages on the Issue of Oil Refining. On January 2018, the then Industrialization Minister Adan Mohamed said it makes more sense to build a new Oil Refinery than to revive and modernize KPRL which he termed as a very old Facility adding that Deliberations for a new Oil Refinery were on course. Just recently on February 2019 the Principal Secretary in the Ministry of Mining and Petroleum Andrew Kamau ruled out the possibility to construct a new local Oil Refinery saying such an expensive Capital-intensive Project would not make Economic Sense going with the current Crude Oil production capacity of 2000 Barrels daily not even in the expected daily Optimum of 80,000-100,000 Barrels.

The now defunct KPRL Refinery that has a daily capacity of refining 80,000 Barrels of Crude Oil is being used to store Crude Oil before Exportation. Its proposed Ksh.120 Billion revival and upgrade plan in 2013 was abandoned never to be reconsidered again even Kenya acquired its full Ownership on June 2016. Kenya has since KPRL Closure in 2013 been purely relying on imported refined Petroleum Products and it seems this will be the case as its Oil Business starts in Crude Oil exportation.

Uganda on April 2018 signed a Deal with a Consortium of American and Italian Firms to construct a $4 Billion (Ksh.412 Billion) 60,000 Barrels  Hoima Crude Oil Refinery by 2023. It has in this invited its EAC Neighbors to buy Shares in this Refinery. Kenya and Tanzania have actually taken up Shares in this with Tanzania taking 8% and Kenya taking 2.5% .The rest have remained silent on this forcing Uganda to to take up the Shares it had offered them. France’s Total has consequently come into this taking up 10% with the majority 60% being left for other Foreign and Private Investors. Uganda intends to refine about 11,000 Barrels of Oil for its daily Domestic Use and Export the Excess.

At the declared Rate of Extraction Kenya and Uganda’s proven Oil Reserves are expected to take at least 55 Years to deplete.

South Sudan on the other hand continues to export all its Crude Oil to Sudan’s Khartoum

EAC Oil Nations-South Sudan,Uganda and Kenya Flags

Refinery before exporting it via Port Sudan. South Africa is in an advanced Process of signing an Agreement with the Government of South Sudan to construct a 60,000 Barrels daily Oil Refinery at a Cost of $1 Billion.

 

(Photos & Graphics Courtesy)

 

 

 

The Pitfall in Africa-China Financial Relations

The theme of the just concluded 7th ‘Forum on China-Africa Cooperation’ (FOCAC) at Beijing was “China and Africa;Towards an even stronger Community with a shared Future through Win-Win Cooperation”.In his address to the Forum that had brought together over 48 African Heads of States and Governments,President Paul Kagame of Rwanda in his Capacity as the

The Inaugural October 2000 Forum on China-Africa Cooperation in Beijing

Chair of the African Union stated that Africa’s growing ties with China is not a Zero-sum game and does not come at anyone’s expense.

I wish to bring to light a Critical issue in our Financial relations with China that if unchecked is a time-ticking bomb.
Since inception of FOCAC 18 years ago at Beiing,Africa has borrowed over $ 150 Billion from China.In 2009 FOCAC,China cancelled some free interest loans owed to it by over 30 African Countries that it described as Poor,least developed and heavily indebted.These were debts that could have matured by the end of 2009.This came after its 2006 FOCAC resolution to double it’s Finance to Africa from $5 Billion in 2006 to $ 10 Billion in 2009.In a move least expected,China again doubled its Finance to Africa from $10 Billion in 2009 to $ 20 Billion at the 2012 FOCAC.Fast-forward to the immediate-previous FOCAC in 2015,China again without much elaboration cancelled some debts owed to it by an unspecified number of African Nations that it described least developed and heavily in debt.These again were interest free loans that could have matured by end of 2015.Surprisingly,China during that 2015 FOCAC tripled its Funding to Africa to $ 60 Billion.
On Monday September 3,2018 during the 7th FOCAC in a striking similarity of events,China has again promised to Cancel some debts owed to it by some African Countries that are staggering in development and heavily in debt.These are debts that could have matured by the end of this year 2018.Amidst these shortfalls,China has maintained it’s funding to Africa at $60 Billion.
This  begs questions;isn’t the deal getting too “good” for Africa,Isn’t it time for Africa to ponder and perhaps rethink its Financial relations with China.Is this this really a Zero-sum game  as President Kagame stated or it’s a ploy by the Chinese Government to tactically enmesh Africa in debt-trap Diplomacy.
As China keeps doubling and tripling it’s loans to Africa,the International Monetary Fund has raised a red flag on Africa with over 40% of low income and low middle income African Countries already in debt distress.Africa must now get its act together.Africa can develop itself without external aid and if it must borrow then it must only bite what it can chew;loans that it can comfortably service and invest the same in prudent,strategic projects with quick high return on investment.It must also firmly deal with Corruption that continues to bedevil its very foundation and course of development.

The just-concluded 7th China-Africa Cooperation Forum in Beijing;September 2018

                                                                                                                                                                                                                                                     African Nations must stay woke and wary with the rapidly increasing China debts and ask themselves what is it that they can surrender if China asks or even weaponizes these debts to demand something in return for debt relief. These are critical issues that African Nations must consider with dire urgency as they seek to deepen their ties and  cooperation with China.