Before the Boom: Prospects and Pitfalls for East Africa Oil

In recent years, East Africa has transformed into an oil hotspot. Across the region, hopes are high that future oil production and exports will energize foreign investment and economic growth. Ongoing exploration and development work will change the face of the African oil map by adding another oil-rich region on the continent alongside West and North Africa. Uganda is preparing to bring its oil reserves onstream and begin exports by the end of the decade and Kenya announced a major oil find in 2012 that promises to bolster its position as a regional hub and African economic heavyweight.

But there remain threats to budding oil industries in East Africa. A number of economic, political, geopolitical, and technical challenges may dampen and delay the prospects. South Sudan remains embroiled in an internal conflict that has shutdown almost half of its production and deflated hopes for new exploration and its involvement in new regional pipelines. In Uganda, even though the first oil discoveries were made in 2006, the construction of a new export pipeline has still not begun. At first a dispute between the Ugandan government and oil companies over the construction of a domestic refinery stalled development. More recently, a feud over capital gains tax threatens to stall the oil industry from advancing. In Kenya, after a string of discoveries beginning in 2012, the implementation of a multi-billion dollar regional infrastructure project, including a pipeline from Uganda, has been slow to start. Its potential development may also serve to complicate relations in the future between South Sudan and Sudan.

The proposed paper will analyze the opportunities and challenges facing East Africa’s oil industries from a country-specific and regional perspective. It will provide an overview of the potential production and reserves potential as well as the political, security, and social risks in Uganda, Kenya, and South Sudan. The paper will also consider how industry developments will influence possibilities for regional cooperation and conflict.

By: Luke Patey

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