If September was the month for oil announcements out of West Africa, October is the month for East Africa, as several major oil and gas companies have announced discoveries of the southeastern coast of the continent.
At the end of August, Anadarko Petroleum
The discovery of gas in such plentiful amounts is a big deal in this region. Though the Energy Information Administration doesn't have production numbers for 2010, you can see that in 2009 there was virtually no energy being produced in East Africa.
|Mozambique||No oil, 124 Bcf gas exported in 2009|
|Kenya||No oil, no gas|
|Tanzania||No oil, 23 Bcf gas exported in 2009|
|Madagascar||No oil, no gas|
Source: Energy Information Administration.
Discoveries by Eni and Anadarko will break production and export records, notablly at a time when Asia and Europe are clamoring for natural gas.
Anadarko and Eni aren't the only oil and gas outfits looking to cash in on East Africa plays. Here is a breakdown of ongoing activity in the region:
Royal Dutch Shell
(NYSE: RDS-A)is parterning with Brazil's Petrobras to explore off the coast of Tanzania.
(NYSE: TOT)is joining Anadarko in an effort to explore offshore of Kenya. And of course, you can't talk about natural-gas discoveries without bringing up LNG.
- Anadarko is in talks with KBR
(NYSE: KBR)about developing a liquefied natural gas facility if actual production amounts to anything near estimates.
The political risk for oil and gas operations in this region is high. Somalia is unstable, there are pirates off the coast, and the economies of these countries are very poor. Mozambique, for example, is one of the poorest countries in the world. It is likely that oil and gas drillers will face similar problems on the east side of the continent as they do on the west, where governments have done a poor job distributing wealth generated from oil, often resulting in frustrated citizens who loot and damage drill sites.
Now that East Africa is on its way to becoming an established gas play, midstream development needs to follow. China has already expressed interest in building a pipeline in Tanzania, and South African officials hope the new gas discoveries will help mitigate its energy shortage. Interested investors should keep an eye on pipeline and LNG development in the region.