Bring out the Banners, Oil and gas: it’s not all it’s cracked up to be

It’s happened. The oil/gas/mineral rush is on. Bring out the banners and bunting. Industrialisation and wealth have arrived! Africa’s problems are over!

After a stop-start journey in the last five years, the big players have arrived: BG group, KPMG,  Royal Dutch Shell, Anadarko, Petrobras, Ophir, Origin Oil, Total, BP and Aminex. Even the ‘security firms’ such as Cenkos, which previously regarded East Africa (and the Congo)  as too swamped in piracy, conflict and uncertainty,  said in November last year “East Africa is high risk and hugely expensive. It is also exceptionally rewarding if exploration is successful.”  With only 500 oil wells drilled so far (compared to West and North Africa’s 35,000), the estimated value of the gas reserves alone are 100 trillion cubic feet.  Petroleum reserves are estimated at 600,000 barrels a day.[i]  The factors that have tipped East Africa into the big game, are these.

Ease of Business and smoother democracies

First of all the creation of the East African Community has theoretically opened up trade borders and lessened tariffs. Secondly there have been technological advances both in mapping seismic faults and geographical areas that were previously unreachable, the economic  risks of drilling have reduced.   Thirdly, there is a concerted and obvious effort by East and Central African governments to sort out internal conflicts and engage more rigorously with the West, whose escalating oil prices have forced them to be more compliant. For the Mozamibiquan, Kenyan, Tanzanian, Sudanese, Somali, Puntland and Ugandan governments, the potential gains from oil,  gas and mineral exploration are huge incentives to come to the table, and to seriously address the ongoing issues of piracy.

Bring out the banners 5

Wads of Cash

But most importantly, there are skads of cash.  £US 2.1 trillion are needed for investment in African oil and gas supply infrastructure  (refineries, roads, whole towns, ports,) between 2010-2035. [ii]  This is where Africa’s burgeoning love affair with China becomes important. Previously smaller ‘wildcat’ oil explorers had the skills, but not the funds to take it to the next stage. Since the Africa  Oil Week in South Africa in November  last year, there have been a succession of buyouts of these smaller firms. China has proved its technical expertise in major projects all over Africa, from airports to the recent LAPSSET developments, and has proved itself cheap, fast, reliable. China National Offshore Oil Corporation (CNOOC)has pledged to invest, although exact figures are impossible to locate. As establishment and US darling Oxford economist Professor Paul Collier remarks: “Future discoveries and resulting exports of resources including oil and gas will be around five times their current levels, based on what remains unexplored in Africa versus currently known sub-soil assets.”[iii]   His sentiments are echoed by Adrian Heavey, CEO of Tullow, a prominent name in East African exploration: “This is a vital step towards the development of the Lake Albert Rift Basin and the oil and gas industry in Uganda and East Africa. I look forward to working in partnership with the Government of Uganda and CNOOC and Total as we progress this world-class asset.”[iv]

 

MYOPIA: People, Resources and Marine Ecosystems
Yet there is a staggering amount of myopia and short-sightedness.  Have we learnt nothing from Ghana, Angola and Nigeria, where bitter battles,  inconsistent petroleum regulation, weak civil society, existing conflicts exasperbated by oil, and  deaths (and losses to shareholders) have shown it’s impossible to invest in oil/gas/mineral exploitation without ‘exploring local capacity’ as the jargon goes?  In other words making sure the people that already live in the area are consulted, and have a share in decision making and profits. And being mindful of existing conservation stresses, and potential ecological problems.

It’s hard to know where to start. Most of East Africa has no regulatory frameworks in place for oil and mineral resources exploitation. Or if they have, there is  an abject lack of willpower to implement them. Selous in Tanzania,  the Albertine Rift and  Murchison Falls National Park in Uganda,  and Virunga National Park in Rwanda have all had Environmental  Assessments or management plans which have not been adhered to or implemented.[v] This is something which international marine organizations OCEANA and the WWF would like to rectify. So at the moment, unlike USA, Europe and some of the Pacific, there is no obligation to implement detailed environmental impact surveys.

The coastal regions (from Somaliland in the North to Mozambique) are acknowledged to be some of the most vulnerable sea areas in the world. WWF and UNEP is already concerned about  myriad of issues: from coastal mangroves, to turtles, whale sharks, porpoises, dolphins, rays, over 400 types of corals,  seagrass, to overfishing.  Says Dr Amani Ngusaru of the WWF “The resources of coastal East Africa are coming more and more under threat from rapid population growth, increased resource exploitation, unplanned development and climate change, burgeoning cities such as Mombasa, Dar es Salaam and Durban are threatening the very resource base that sustains them.”

The perils of oil spills are visible and high profile, in fact it is the planned building around the ports, which will cause the most damage. Oil spills upon marine environments are dwarfed by those of pollutants introduced from other sources (including domestic sewage, industrial discharges, leakages from waste tips, urban and industrial run-off, accidents, spillage, explosions, sea dumping operations, oil production, mining, agriculture nutrients and pesticides, waste heat sources, and radioactive discharges). Land based sources are estimated to account for around 44 percent of the pollutants entering the sea and atmospheric inputs account for an estimated 33 percent. By contrast, maritime transport accounts only for around 12 percent[vi].

Bring out the banners 4

Accidents will Happen

In Jan 2012 Exxon Mobile – announced its staggering annual profits of $41.1 billion, yet no plans are in place to either enforce action plans or responses for oil spills, in any of the areas allocated for deep or shallow water drilling. Yet last week, the oil giant BP agreed to pay $7.8bn to settle claims from an estimated 110,000 victims of the Deepwater Horizon oil spill in Mexico Gulf. In the last six years there have been four major oil spills, resulting in an estimated 100 billion gallons of oil into the sea.

Oceana, the largest international global ocean advocacy group says that currently,  as well as relying on financial insurances,  companies can pass along much of their cleanup costs to the domestic taxpayer when faced with disaster. Talking about the recent BP spill, Says Jacqueline Savitz, senior campaign director at Oceana. “Taking the lives of 11 people, injuring many more, destroying tourism and fisheries industries, spilling 200 million gallons of oil and killing hundreds of turtles, dolphins and other ocean life is not, and should never be, considered a normal cost of doing business. It is bad business, and not what was intended when the tax write-off was established.” Given the poor record of citizen engagement in African countries, and the dubious taxing situation (allegedly 85% of Africa’s taxes remain unpaid)[vii]  and the weak media, it is highly unlikely the mechanisms will be in place to protect the populations of the coastal regions, who are already politically, economically and socially marginalised.

Even when data is forthcoming,  it is so daunting, it is a huge task to tackle it. According to the WIOMSA/UNEP  ‘Science 2008 Marine Survey.’ 40% The amount of the ocean heavily affected by environmental mismanagement, 50% Amount of coral reefs heavily damaged, and  0.5% (850,000 square miles) of the ocean floor are very heavily affected.  Only 4% of the entire ocean shows no traces  of human impact.”[viii]

 

On Shakey Ground

On terra firma there are also problems. In Uganda three British firms, Tullow, Tower and Dominion are all exploring the Albertine  Rift, a lake area.2- 2.5 billion barrels of oil have already been discovered. This is a vulnerable area of skirmishs with DRC rebels: over 100 people have been kidnapped in this area in attacks linked to fights over ransoms, minerals and oil. The most recent attack on the border town Mutungo on 2 August 2011 by the Mai-Mai militia displaced 70,000 residents[ix].  At a local level, villagers are concerned.  Florence  Landsberg of the World Resources Institute explains: “The fish stock is already at risk, because there is more catching of fish that are not mature. The upgrade of the roads has allowed for more fish to be exported. The restocking of the fish is not going to happen if there is no intervention”. Says Peter Viet, also of WRI “ Many scientists will tell you that the Albertine Rift is the most biologically diverse area in all of Africa. There are national parks, wildlife sanctuaries, forest reserves, and there already is some impact on these protected areas. For example, there is drilling in Murchison Falls National Park, even though many public interest environmental lawyers in Uganda will tell you that the law does not allow that. Kenneth Kakuru of Greenwatch has filed a pleading in the High Court over extractive resource industries in national parks. (His case was recently rejected). There was already discussion of de-gazetting one of the parks to make way for an oil refinery. There is also talk of a pipeline that would take the oil to Mombassa that would have effects on biodiversity. And there is evidence  oil workers  are poaching inside protected areas[x]. He adds that Achioli and Bunyoro people, local to the area, are selling up fast, at below market prices, scared that the government will not recompense them adequately.

There is further controversy in the area, according to a recent article on Pambazuka; “ A vicious land grab,’ Allimadi writes, ‘is being carried out in Uganda, pairing the country’s dictator with an ‘investor,’ and the targets are the Acholi, genocide survivors who live in the northern part of the East African country, on abundant, fertile and mineral-rich land.’[xi]

Existing Lack of Resources for Citizens:

None of the existing plans to extract oil, gas and petroleum  come with concrete systematic plans to provide for the communities in the area, beyond some references to providing local jobs in some cases.   The threats to forests (due to charcoal and firewood exploitation) and erratic provision of electricity are well known in East Africa.  Drilling down to basics, Erica Mackey, Co-Founder of Off-Grid Electric in Tanznia, says “Generally, people in Africa suffer from an expensive electrical grid, an unreliable grid, or have no electrical grid at all.  Increasing the amount of raw materials extracted from the continent is not going to automatically increase infrastructure access, decrease transportation costs or ultimately extend the electrical grid to the 90% of East Africans who live without a connection.” She goes onto add: “If the goal of energy exploration is to actually increase energy access in Africa rather than the developed world, than the focus has to shift to include renewables.  In addition to exploring the continent for oil, gas and coal, international investors should look at ways to finance business models that provide clean power  as a key component to the future of Africa’s power provision”.

(Mostly) Angry locals- lack of consultation

Despite high tech imaging of geological deposits, pictures of the sea from space, the reality is we don’t have an accurate record of the approximately 50 million pastoralists and 200 million who depend on the sea and land for their livlihoods in Africa. There is no documented record of contacting these communities in the regions mentioned for their views on oil and gas exploration[xii].

Thousands of miles away, on the Kenya coast of Mombassa, tucked between the new port of Lamu and Tanga, there is considerable trouble brewing:  The Mombassa Republican Council, a secessionist movement, wants autonomy from Kenya. They are popular in the area, where there is high illiteracy rates, the presence of Al Shabaab,  low rates of enrolment in schools and universities, and a sense they have been abandoned by Nairobi. Land tenure is ambiguous or is not officially recognised. More than 60 per cent of indigenous coastal people do not possess title deeds to their land. Others have entered into a kind of quasi squatter-tenant agreement with land owners.  The problems of local fishermen and farmers have been well documented by local NGO’s, as they compete with trawler fishing, and larger super-boats that can pinpoint shoals, leaving fishermen with paddles in dug out canoes, floundering.

Their situation, despite riots and four deaths in December 2011, goes unreported in national media. Ditto the situation  in North Kenya: hours away from the capital Nairobi, where news editors  and reporters, constrained by tiny budgets and  tight deadlines, are unable to go and see for themselves. There  are rumours presently circulating that valuable archeological deposits in Turkana, North Kenya, have been already destroyed through oil exploration.  However no organisations want to be identified with ‘squealing’ so the situation remains unreported in local press: a local journalist was murdered in Loliondo, reporting on land grabs two years ago.

 

A glimmer of hope

Many of the issues these people  in the East African Coastal regions face are similar to those in Puntland, Somalia, where resources are seized upon, in a dearth of opportunities.

In Puntland, local leaders under the Transitional Government are bucking the trend. Aware that no mechanisms exist to make sure money flows into the region, they are however, in an optimistic mood. In an Irin article, Farah Hassan Atosh, a traditional elder and resident of Armo town, 28km northwest of an oil field, said: “We are expecting great things. It will change our lives for the better. Insh’Allah [God willing] we will never depend on others to give us food again.” He said that change was already happening in Armo town (population 25,000). “You can see many more people arriving every day and it can only add to the development of the town.”  Drilling for oil began in January 2012. Said Atosh,”We not only support it, we will defend it from anyone who wants to stop it.” He said the project was also contributing to peace-building in the area. “They are employing many young men who would have been idle and easy prey for recruitment into militias.”

 

Lack of Financial accountability: have we learned nothing?

In Tanzania, there are mechanisms in place to regulate, but according to regional environmental consultants,  (who prefer to remain unnamed) there is little will power to implement them and ministers rapidly forget about their commitments. Track records of environmental investigations in Selous,  Stiegler’s Gorge dam, Kidunda dam and Mkuju River uranium mine and oil exploration do not bode well: they are dusty reports on shelves somewhere. Pweza, Chewa and Chaza wells have been drilled in deepwater  in the northern part of the Ruvuma Basin and the Mafia Deep Offshore Basin held by BG and Ophir Energy. The Chinese government is providing Tanzania with a $1.06-billion loan to construct new infrastructure, which includes a new gas pipeline, feeder roads and telecoms. All these areas are deemed ecologically vulnerable, and there is no public record of community consultation or mechanisms to ensure profits flow back into community development.

One of the main problems is tracking the money: the investments, and ways to prevent a small elite benefiting.  Again, Kenya, Tanzania, Uganda have poor records. In East Africa, only companies registered with the Securities and Exchange Commission (in the USA) are required to submit financial reports. Even then as in Uganda, local ministers and judges ensure disclosure of documents relating to oil is kept out of the public sphere[xiii].

Meanwhile, the Mara River is an international river, shared between Kenya and Tanzania. The mining areas will impinge upon the dwindling  Mara River Basin and draw valuable and scarce water. The basin  is about 13,750 km2, of which about 65% is located in Kenya and 35% in Tanzania. The Mara River runs through the Masai Mara Game Reserve on the Kenyan side and the Serengeti National Park on the Tanzanian side, both of global conservation significance and of great economic importance for tourism.  “Over 80% of Africa’s lions have been displaced due to environmental changes” says Richard Anderson in an article on the BBC in November 2010.

A recent, (Oct 2010)  UNEP report, The Economics of Ecosystems and Biodiversity (Teeb), put the damage done to the natural world by human activity in 2008 at between $2tn (£1.3tn) and $4.5tn. A second study, for the UN-backed Principles for Responsible Investment (PRI), puts the costs at $6.6tn, or 11% of global economic output. [xiv]

It looks like we are no way reversing the trend.

END 2500 words copyright Thembi Mutch

[i] Allafrica.com/stories/2011111100232.htm

[ii] Sources: Ernst and Young, International Energy Agency, Business Review, Oil Review Magazine. http://www.wri.org/project/equity-poverty-environment;

[iii] The Plundered Planet, Why We Must, and How We Can, Manage Global Prosperity. 2012 Collier P. 2010 Oxford University Press, http://www.guardian.co.uk/books/2010/may/08/plundered-planet-paul-collier-review

[iv] Feb 3 2012 press release http://www.tullowoil.com/index.asp?pageid=137&category=&year=Latest&month=&tags= &newsid=727

[v] Personal discussion with environmental consultant who prefers to remain anonymous. March 16 2012

[vi] Source http://www.greenpeace.org

[vii] Tax Justice Network

[viii] File;Ecologist/Report%20on%20Coastal%20regions%20UNEP%202008.html

[ix] Hannah Wadlove Uganda the Key in East Africa’s Oil-Driven Energy Revolution, 7.11. 2011 http://allafrica.com/stories/201111080815.html

[x] Q&A: Avoiding the Resource Curse in Uganda By Peter Veit and Florence Landsberg on Oct 19 2010 http://www.wri.org/stories/2011/04/qa-avoiding-resource-curse-uganda

[xi] Milton Allimadi, Black Star, Pambazuka, Feb 12 2012

[xii] http://www.wri.org/project/equity-poverty-environment

[xiii] http://www.wri.org/stories/2010/10/avoiding-resource-curse-spotlight-uganda-oil

[xiv] Source http://www.bbc.co.uk/news/business-11495812

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