East Africa Shines as Oil Exploration Bright Spot

HOUSTON (AFP), Mar. 10, 2010

East Africa has become a promising new frontier for oil exploration and major multinationals are jostling for the rights to search for black gold, industry experts said Tuesday.

"There are still large areas which are essentially unexploited and major efforts are needed in East Africa," Tiziana Luzzi-Arbouille, an African specialist with IHS Global Insight said at the CeraWeek energy conference in Houston, Texas.

While the Atlantic coast of Africa -- most notably Nigeria and Angola -- has long been exploited by western oil companies, it took decades for the industry to turn its sights to the east.

Things changed in 2006 with the first significant discovery in Uganda, in the Lake Albert basin. Since then another 15 sites have been confirmed, said Luzzi-Arbouille, who estimated Uganda's petroleum reserves at around 700 million barrels.

"What happened in Uganda made it easier for smaller companies to raise funding," said Tewodros Ashenafi, head of Southwest Energy, an Ethiopian company exploring in that country's Ogaden basin.

"Many people were saying: there is nothing in Uganda. Many people are saying, there is nothing in Ethiopia," he told the conference. "In about a year and a half, I'm looking forward to saying 'I told you so'."

Significant natural gas reserves have been discovered in Tanzania and Mozambique. Ethiopia and Somalia are also sites of intense exploration. And Madagascar holds "enormous reserves," Luzzi-Arbouille told AFP in an interview on the sidelines of the conference.

"The question is what we'll be able to extract," given the difficulty in accessing the resources, she said.

"Ten percent would be pretty good."

Major oil companies have thrown themselves into the race: French group Maurel & Prom is drilling in Tanzania, while U.S. group Anadarko Petroleum Corp. (APC) and Norway's Statoil ASA (STO) are drilling in Mozambique's Rovuma basin.

"At the beginning, smaller companies were taking the risks. Now all of a sudden we see the big fish arriving," Luzzi-Arbouille said.

Britain's Tullow Oil PLC (TLW.LN) is battling with Italy's Eni SpA (E) for control of the Ugandan deposits in Lake Albert, after its partner, Heritage Oil PLC (HOIL.LN), sought to sell its 50% stake in two oil fields.

Tullow prevailed last month and bought the stake for $1.5 billion, gaining total control of the Ugandan side of the lake, which is partially controlled by the Democratic Republic of Congo.

Tullow has said it will seek a partnership with a large exploration company in order to offset the colossal investments needed to exploit the oil fields and develop the infrastructure needed to transport the crude.

Comments by high-ranking Ugandan officials indicate the short list includes China's state-controlled CNOOC, France's Total and US giant ExxonMobil.

The region is particularly attractive to the Chinese, who are already very active on the African continent, because of easier and shorter transport routes to Asia.

Copyright (c) 2010 Dow Jones & Company, Inc.

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