East Africa's Fossil-Fuelled Future and Why We Must Lower Our Expectations

By Aidan Eyakuze

In recent days and weeks, the southern Tanzanian towns of Mtwara and Masasi have witnessed an evolution of protests from relatively small affairs into huge rallies, to violence. Last week, journalist Maria Tsehai tweeted a photo of a burnt shell of a car with this caption, “This is Masasi today, 20 vehicles burnt, 2 people dead, 7 houses and buildings burnt…hali mbaya!” Tanzanians, and their neighbours, are stunned by this unTanzanian show of anger. 

Residents of Mtwara and Masasi are unhappy about the proposed $1.2 billion pipeline that is due to carry gas from the seabed many miles off ‘their’ shores to Dar es Salaam. The offshore gas discovery has ignited a hope and a fear in their collective bossom. They hope that it will bring investment, create jobs and quickly transform their lives beyond all recognition. The fear is that it will do no such thing as it flows north at breakneck speed to light up the houses, cook the food and change the lives of their urban compatriots. 

While their fears are probably justified, their hopes, and those of the rest of us East Africans may well be dashed. It would be good idea for us all to lower our expectations for three major reasons; a potential price-depressing global energy glut, the emerging concept of unburnable carbon, and the modest size of the coming oil and gas ‘boom.’

EAST AFRICA LAKE OF HYDROCARBONS

According to a post in the ThinkAfricaPress blog, drilling in East Africa, involving some 18 companies, is taking place in nearly 30 offshore coastal areas in southern Kenya, southern Tanzania, and northern Mozambique. With only 500 oil wells drilled so far (compared to West and North Africa's 35,000), the estimated volume of the gas reserves remaining is around 100 trillion cubic feet. 

The draft Tanzania Natural Gas Policy published by the government in October 2012 states that ‘as of June 2012, natural gas discoveries of about 33 trillion cubic feet (or 6 billion barrels of oil equivalent) have been made from both onshore and offshore basins.’ New discoveries of commercial oil reserves in Uganda can sustain production of up to 100,000 barrels a day for 25 years and in September 2012 it was reported that Uganda had officially revised upwards its estimated oil reserves by 40 percent to 3.5 billion barrels. Estimates of Somalia's reserves, onshore and offshore, go as high as 110 billion barrels of oil.

GLOBAL ENERGY MARKETS ARE INHERENTLY UNCERTAIN 

East Africa is exciting because it is a relative newcomer to the global energy game. However, the region’s domestic energy market remains small. The five East African Community (EAC) countries consumed 144,000 barrels of oil per day in 2010, up from 96,300 in 2003. Such a small local market will struggle to justify the billions of dollars of investment needed to build oil refineries and liquefied natural gas (LNG) plants. 

Therefore, the ability to export the region’s oil and gas to global markets will drive investment decisions. This reality explains the tension between governments on the one side who are pushing for sizeable oil refinery and LNG plants to be built in Uganda and Tanzania, and investors on the other, who are seeking assurances that they will be allowed to export as much crude oil and gas as they need to make the economics of the costly projects work.

Looking at the energy supply side globally there are proven reserves of 26,500 trillion cubic feet of global gas reserves, which is equivalent to 200 years of supply at current consumption rates. Technology is unlocking conventional and unconventional sources of gas (horizontal drilling, fracking and shale gas). These advances in technology and the game-changing discoveries of shale gas in the U.S. – which could turn it from a net importer to a net exporter of natural gas – have raised the level of uncertainty about the future global energy markets that East Africa will face. 

Combined with what could be prolonged economic austerity conditions in the rich countries, the expanding energy supplies could push the world into a period of a price-depressing energy glut in the coming years. Production from the new sources in Uganda, Tanzania and Kenya is not expected to start earlier than three to five years, by which time the global energy marketplace could have changed beyond all recognition. 

"UNBURNABLE CARBON" RISKS MAKING EAST AFRICA'S DISCOVERIES WORTHLESS 

Another game-changer lurks on the horizon and this is the concept of ‘unburnable carbon’. Climate scientists have calculated that if 886 billion tons of carbon dioxide (886 GtCO2) is released globally during the period 2000 – 2050, there is a 20% chance that global warming will exceed two degrees celcius (2°C). By 2011, humanity had already burnt over one third of this 886 GtCO2 budget, and the known fossil fuel reserves easily exceed the remaining allowance. All fossil fuel reserves beyond this limit are what is referred to as unburnable carbon.

Humanity’s efforts to keep global temperature from rising above 2°C by the year 2100 will intensify as the effects of global climate change manifest themselves more aggressively and with greater devastation. Such efforts may result in global agreements to radically limit the use of hydrocarbons as a major source of energy which would convert more than half of the world’s proven fossil fuel reserves, including East Africa’s new discoveries, into worthless ‘unburnable carbon’.

EXPECT A VERY MODEST BOOM

East Africa’s governments and citizens are expecting oil and gas to deliver a fast, deep and positive transformation of the collective and individual welfare. But internal cohesion is at risk as the hydrocarbons fuel an emerging clamour to renegotiate the social and political contract between citizens and the state. The recent Mtwara and Masasi incidents are proof of this. Evidence of growing demand for sub-national autonomy are evident also in Bunyoro in Uganda and Turkana in Kenya. Zanzibar is toying with complete secession, taking with it the rights to the oil and gas in its exclusive economic zone. 

Recent analysis suggests that the hydrocarbon boom may actually be a lot more modest than anticipated. Analysis published in June 2012 entitled "Managing a modest boom" concludes that “there are not going to be any significant oil revenues for Uganda, even at current crude prices, any time soon..By 2030 it may be about US$40 per person in 2012 US dollars.”

This analysis has yet to register in the public discourse, allowing the expectations ‘bubble’ to continue inflating. While political, business and civil society leaders would do well to engage with the evidence in order to manage the expectations down, there is little sign of this happening soon or to the necessary scale and intensity. East Africans may be setting themselves up for deep disappointment. The people of Mtwara and Masasi seem to have arrived there before the rest of us.

Download SID Trend Monitoring Report East Africa's Lake of Hydrocarbons

Photo: Wavuti

 

about the author

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).

EA Trend Monitor Observatory's picture

The Trend Monitor Report is a SID initiative sponsored by the Rockefeller Foundation with the aim of monitoring and analyzing key trends and patterns in the Greater Horn of Eastern Africa Region (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Puntland, Rwanda, Somalia, Somaliland, Sudan, Tanzania, Uganda).