Why Rwanda hosted oil summit

The 624 delegates who, this week, attended the 7th East African Petroleum Conference and Exhibition in Kigali were defiantly braggadocious about the region’s oil and gas potential, this in spite of the ongoing global challenges bedeviling the sector.
Participants at the oil summit in Kigali last week. (Timothy Kisambira)
Participants at the oil summit in Kigali last week. (Timothy Kisambira)

The 624 delegates who, this week, attended the 7th East African Petroleum Conference and Exhibition in Kigali were defiantly braggadocious about the region’s oil and gas potential, this  in spite  of the ongoing global challenges bedeviling the sector.

In summary, it was a ‘feel good conference’ in which speakers reminded investors present of how the region is rich in oil and gas.

The East African Community Secretary General, Richard Sezibera, was one of those who rallied for capital investments in oil resources. 

“A few years ago, some experts were predicting the end of the era of oil. They painted a bleak era of dwindling petroleum reserves and soaring demand. Africa in general and East Africa in particular, did not even register on their radar then,” said Sezibera. 

He added that advancement in technology had aided the discovery of oil in the region and now the discussion is focused on how to recover that oil from deep underneath; it means investors. 

There are 2.3bn barrels of recoverable oil off Uganda’s estimated deposits of 6.5bn barrels and Kenya’s 600 million as well as Tanzania’s 50 trillion feet of natural gas.

But Sezibera encouraged investors to approach East Africa as ‘an integrated, united and harmonized entity for conducting business and making investment decisions, in order to enhance returns on investment”. 

Oystein Michelsen, Tanzania’s country manager for Norwegian firm, Statoil, agreed. He said the region had a good environment for business. Statoil has been exploring for oil and gas in Tanzania since 2007.

It’s the first time that Rwanda, which is yet to join the region’s list of the ‘oil wealthy’ hosted the petroleum conference which has previously taken place on rotational basis in Kenya, Uganda and Tanzania. So what’s in it for Rwanda?

“The enormous energy and natural resources that this region is endowed with can be optimally developed through cooperation among partner states and other partners,” says Prime Minister Anastase Murekezi. 

Murekezi urged his counterparts to prioritize exploration, production, refining, storage and transportation by pipelines.

“It is only through regional approach that EAC can develop such infrastructure that a single country in cannot afford…,” he said. 

Indeed, yesterday President Paul Kagame hosted his counterparts from Uganda, Kenya, Tanzania and South Sudan – as well as Burundi Vice President and Ethiopian Foreign Affairs Minister – for the ninth Northern Corridor Integration Projects (NCIP) summit during which the Presidents were briefed on the progress made in mobilizing funding for major petroleum infrastructural projects. They include a refinery and pipeline which the partners agreed to finance collectively. 

Rwanda stands to gain heavily from oil produced in the region by investing in the infrastructure to transport it; experts say the country is securing the future of its oil supplies. 

The other area of interest to Rwanda is environmental conservation in the heat of exploration and production whose effects, experts say, could be far reaching in scope, to affect even countries that may not have had the resource in the first place. 

As the region welcomes investors to explore and produce the much needed oil, expert voices seeped through calling for promotion of sustainable utilization of the natural resources by taking measures that would effectively protect the natural environment of the partner states. 

Huge ambitions

The conference closed on Friday to give way for the Northern Corridor Summit that took place at the same venue, yesterday but most of the notes, especially those on fast tracking progress on the key petroleum projects, were carried forward.

The grand plan is to link all the EAC Partner States with oil products pipelines that will facilitate access to the oil resources discovered in the region as well as imports from the international market. 

A key project under that ambition is the construction of Eldoret-Kampala-Kigali pipeline whose prequalification process has been completed. 

But officials says that preparatory work for extending the project to Bujumbura are set to commence following the securing of funding for feasibility studies for the Kigali-Bujumbura section. 

The pipeline network will also be linked to Tanzania from a hub in Mbarara (Uganda) with a pipeline to Mwanza, Isaka and finally to Dar es Salaam. 

Cheap risk 

But while these large ambitions are well intentioned, a bigger headache for the region is how to mobilize the funds needed to bankroll them and have them in time at a point when global dynamics have made oil a cheap risk; high input but with low returns to investment.

With global oil prices in a nose dive, investors are watching out for when such a trend might stop because at the current global prices, it doesn’t make business sense to invest now, according to most analysts.

However, such a wait works against the region whose hopes are banked in the willingness of big international investors to sink capital in their projects.

For instance, the infrastructure and energy projects that the region has pledged to implement are estimated to cost $100 billion over the next ten years as capital costs. 

Another $500 million is needed over the next three to four years in project preparation costs covering required studies, project packaging and promotions, and transaction advisory costs. 

Currently all governments in partner states are undertaking a massive drive to woo investors to buy into these projects.

“Given the huge capital requirements, the input of both public and private sectors is necessary in the implementation of these projects. I therefore invite the Private Sector from the EAC, Development Partners and all stakeholders in the sector of energy and gas to partner with EAC Governments in these efforts,” urged Premier Murekezi. 

Uganda whose total oil infrastructure budget is more than $20 billion, recently selected a consortium led by Russia’s RT Global resources to construct the country’s first refinery pending final contract negotiations. 

Rwanda and other Northern Corridor partners have a stake in the project and agreed to contribute to its construction. With the Russian oil industry hit hardest in the ongoing global energy price crisis, the progress of this and other projects is going to be a test for the EAC. 

The East Africa Region might be a proven destination for Investment in petroleum resources but the global terrain for the sector is still wobbly and that could be the thorn in the EAC’s oily boots.