A police vehicle escorts tankers ferrying crude oil from Ngamia 8 oil
fields in Turkana County to Mombasa in Kenya's Early Oil Pilot Scheme on
June 3, 2018. PHOTO | JARED NYATAYA | NMG
The recent commencement of Kenya’s Early Oil Pilot Scheme
confirms the country’s quest to join petroleum producing and...
exporting nations.
exporting nations.
Comprising the latest entrants into the ranks
of petroleum oil and natural gas endowed nations, Kenya, Tanzania and
Uganda are touted by some to be on the verge of an economic revolution.
This
first article of a three-part series puts into context the quantity of
East Africa’s bounty, to show the significance, if any, of its resources
to the rest of the world.
For the purpose of this
analysis, we defined East Africa as comprising Ethiopia, Kenya, Uganda,
Rwanda, Burundi, South Sudan and Tanzania.
-------------------------------------------------
British
petroleum economists make technical distinctions between different
measures of reserves. “Proved reserves” is the term used to refer to
reserves that are geologically recoverable under current economic and
operating conditions.
In other words, reserves that do
not demand highly specialised techniques and technologies to extract
and whose extraction leaves a reasonable margin of profit under
“current” oil.
The absence of accurate statistics on
Kenyan and Ugandan oil bounties on public databases of major oil
producers like British Petroleum and information collecting agencies,
perhaps bears testament to the novelty of those discoveries if not their
triviality to total global reserves.
Quotations of
Kenya’s and Uganda’s reserves are based on recent press releases and
best estimates by exploration firms and scant government sources.
Proved Reserves at Global, Continental and Regional Levels
The
quantity of proved oil reserves, rate of production and reserves to
production ratio are the major variables that allow for the oil bounties
of different regions and nations to be compared in a sensible manner.
Economic factors driven by market conditions, technology and geology of an area determine the quantum of a “proved reserve.”
On a global scale, every continent is endowed with a considerable bounty of oil.
Of
the world’s 1.706 trillion barrels of proved oil reserves, the Middle
East’s 813.5 billion barrels comprises 47.7 per cent of all proved
reserves making this region the wealthiest in crude oil endowment.
Venezuela’s
oil fields are the largest held by a single nation. That nation bears
300.9 billion barrels, making up 91.76 per cent of South and Central
America’s total proved reserves and 17.6 per cent of the global share of
proved oil reserves on the globe.
The world’s 1.706
trillion barrels of proved oil reserves amounts to 36,461 litres of
unrefined crude for every living human based on 2017 population.
Finally,
it is estimated that at the current average rate of production, global
oil reserves will last another half century before they are depleted.
Though
concentrated in the Middle East and South and Central America – regions
that hold 66.9 per cent of proved oil reserves globally – oil is not a
resource unique to any particular region of the world.
Africa’s
endowment of 128 billion barrels is remarkable when it is noted that
Libya’s 48.4 billion barrels is roughly equal to the endowment of the
whole Asia Pacific region. That is to say, Libya and the Asia Pacific
each equally hold 2.80 per cent of the world’s proved oil reserves.
South
Sudan, Kenya and Uganda are the only East African nations with proved
oil reserves. For scale, this region’s 10.754 billion barrels amounts to
22.23 per cent of Libya’s endowment and a mere 0.63 per cent of all the
proved reserves in the world.
By virtue of the small
size of its proved reserves – reserves that have yet to begin being sold
in the market – oil discoveries in East Africa are not significant on
the global map.
Stated differently, the six eastern
Africa nations are small players in the global petroleum extraction and
marketing league. This is essential to note especially after
establishing the fact that crude petroleum reserves are liberally
distributed globally.
As possessors of crude petroleum
oil fields, Kenya and Uganda will join South Sudan as oil producers but
they are all not entering an elite club. (See table 1)
Crude Oil Proved Reserves, Production - East Africa
Table 1: Crude oil production, East Africa
| Country | Reserves bpd (Billion) | Production bpd (Thousands) | Lifespan (years) |
|---|---|---|---|
| Kenya | 0.754 | 80.000 | 25.800 |
| Uganda | 6.500 | 60.000 | 296.800 |
| South Sudan | 3.500 | 118.000 | 27.400 |
| Total East Africa | 10.740 | 490.000 | 60.130 |
| Total Africa | 128.000 | 7,892.000 | 44.300 |
| Total World | 1,764.331 | 92,150.000 | 50.600 |
Lifespan = Reserves/Production ratio | Bpd - Barrels per day
Production
The rate of
production of an oil field is indicative of its potential as determined
by the market. A large proved oil reserve attracts large investments.
Conversely,
the larger proved reserve lends itself to higher rates of production
before the point of depletion is reached. The rate of production is thus
a determinant of the lifespan of an oil reserve.
In
2016, the world produced an average of 92.2 million barrels of crude oil
a day. Predictably, the Middle East led in rate of crude production,
extracting 34.5 million barrels of crude a day.
In
that same year, the United States edged out Saudi Arabia as the leading
national oil producer in the world, extracting crude at a rate of 12.35
billion barrels a day compared with Saudi Arabia’s 12.349 billion
barrels a day. They each averaged 13.41 per cent and 13.40 per cent
respectively of the global petroleum production for 2016.
In
comparison, continental Africa produced 7.892 million barrels a day.
South Sudan averaged 118,000 barrels a day while Kenya and Uganda hope
to begin their own operations at the modest rates of 80,000 and 60,000
thousand barrels a day respectively.
At present day
rates of production, the world’s oil bounties will all be depleted
within half a century. When compared discretely, South and Central
America’s reserves have the longest lifespan at 119.9 years based upon
their present extraction rates.
On a national level,
it is estimated that US reserves will be depleted in 10.6 years while
Canadian reserves ill deplete in 105.1 years.
At
80,000 barrels a day, Kenyan reserves will be depleted in just under 25
years. Uganda’s and South Sudan will see depletion in 296.80 and 27
years respectively, based on the extraction rates that have been
declared.
This goes to show that despite being the
latest entrants into the global oil market, the eastern Africa countries
together will not affect general supply of oil to the world market.
Reasoning
from the facts, the region has far too little reserves to get
invitation into that price-fixing cartel of Organisation of Petroleum
Exporting Countries, where the countries with the largest reserves
co-ordinate market activity to maintain supply and determine prices.
The
range of future rates of production can be predicted by the size of the
proved reserve which will itself drive the scale of investment in a
given reserve.
As South Sudan’s’ proved reserves are
higher than Kenya’s, it is likely and possible for South Sudan’s rate of
production to remain higher than Kenya’s.
Based on
the statistics released by the government of Uganda, it’s 6.5 billion
barrels of proved reserves may attract the highest investment in the
region, giving Uganda a higher production rate than its neighbours.
Based
on its chosen rate of extraction, it appears that a choice may have
been made to stretch the lifespan of these reserves instead of depleting
them sooner. OPEC nations are price setters and can fix their rates of
oil production.
For East African nations, however, the markets will decide the rates that these reserves should be extracted. (See table 2)
Crude Oil Demand - East Africa
Table 2: Crude Oil Consumption
| Country | bpd (Thousands) |
|---|---|
| Kenya | 93.0 |
| Ethiopia | 65.0 |
| Rwanda | 60.0 |
| Tanzania | 60.0 |
| Uganda | 27.0 |
| Burundi | 15.0 |
| South Sudan | 11.0 |
| Total East Africa | 263.5 |
| Total Africa | 3,937.0 |
| Total World | 96,558.0 |
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