The global financial crisis is hurting eastern Africa’s efforts to find oil and gas as prospectors cut back on investment and activities, according to one energy official from the region.
“The current global financial meltdown and reduction in oil prices have adversely affected the exploration finance base of many companies,” said Kenya’s energy minister, Kiraitu Murungi.
“Many of the companies exploring for oil and gas in the region have put on hold, scaled down, or rescheduled their work,” Murungi told a conference on oil and gas exploration in his country’s Port of Mombasa.
Murungi said new applications for exploration licenses in Kenya have fallen to nearly none from a record 14 licenses issued last year as firms encouraged by record-breaking crude prices aggressively pursued oil in frontier zones such as eastern Africa.
Tullow’s $2 billion
Still, some people are getting funds for exploration and development in the region despite the current global financial crisis. Consider the $2 billion loan that Tullow Oil secured last week even as the Kenyan minister was speaking.
Tullow said that $2 billion in loans was offered by BNP Paribas, Bank of Scotland PLC, Barclays Bank PLC, Calyon, ING Bank NV, Lloyds TSB Bank PLC, Natixis SA, NIBC Bank NV, and Societe Generale.
Also backing Tullow’s $2 billion loan package was Standard Bank PLC, Standard Chartered Bank, Sumitomo Mitsui Banking Corp., Royal Bank of Scotland PLC, and IFC, a member of World Bank Group.
“These new debt arrangements represent a major milestone in the development of Tullow’s financial capability,” said Tullow Chief Financial Officer Ian Springett. “To put in place debt arrangements of this scale, particularly in the current credit environment, is a tremendous achievement,” he said.
It is indeed a tremendous achievement, and Springett underlined the reasons for it, saying, “This demonstrates the quality of Tullow’s assets as well as the strength of our banking relationships.”
Ugandan exports coming
More to the point, Springett noted how the $2 billion loan will positively affect the company’s plans. “Combined with our equity placing in January, we are strongly positioned to pursue our current investment plans and longer-term growth strategy,” he said.
Hardly had the ink dried on the loan documents than Tullow announced plans to expand its early oil production scheme in Uganda and could be producing 10,000-20,000 b/d there within a few years.
According to Tullow Chief Operating Officer Paul McDade, oil from the early production scheme is intended for consumption in Uganda’s domestic market, with first production of as much as 2,000 b/d expected at yearend or by early 2010.
However, Kenyan energy officials should take note of one more very important fact: The expansion of Uganda’s domestic oil production plan won’t delay a 100,000-150,000 b/d export plan involving the eventual construction of a 1,300-km pipeline to the Indian Ocean through—guess where?—Kenya’s Port of Mombasa.
