I will share in this column a presentation I made last week on the latest status of oil and gas investments in the region.
When global oil prices went below $30 per barrel in 2014, the industry across the world slowed down as investors adopted break-even economics. Many investors rationalised their assets through delayed investments, strategic acquisitions, mergers, joint ventures and even abandonment.
However, during this downturn the industry has achieved cost-efficiencies through improved operations and new technologies and this is helping during the recovery stage.
The oil prices have now recovered around $80 which marks the end of a typical five-year oil supply/price/investment cycle which has historically happened and which will invariably repeat itself. High prices prompt increased investments which produce more oil that leads to price collapse and reduced investments.
In our region many oil and gas investments have changed hands but have mostly survived the five years, and are now at varying stages of recovery with companies heading towards final investment decisions for first oil or gas.
Uganda appears to have made the most progress during a difficult market environment explained mostly by an expanded presence of well capitalised investors like Total and CNOOC; a satisfactory finalisation of legal, regulatory and institutional frameworks; and of course a high level of government focus and stewardship.
The most significant breakthrough for Uganda has been the crude oil pipeline through Tanzania, a project that has progressed fairly quickly and is now awaiting commercial and investment decisions.
Significant progress has also been made towards final investment decisions on crude oil production development which targets 120,000 barrels per day first oil in 2021/22.
The refinery project has attracted equity participation by General Electric of USA and its Italian partners with construction expected to commence in 2022 for a 2025 completion. Plans and commitments for service infrastructure (roads and a new airport) to support oil production, export pipeline, and refinery are progressing steadily.
Kenya has recently witnessed increased activities by the Lokichar oil basin joint venture (Tullow, Africa Oil and Total) with FEED (front end engineering design) studies for oil production development and the export pipeline through Lamu progressing in parallel.
A final investment decision is expected next year for an initial 60-80,000 barrels per day (bpd) first oil production and export by 2022/23. However the Upstream Petroleum Law is yet to be issued, thus holding up work on enabling legal, regulatory and institutional frameworks.
The only other activity in Kenya is the exploratory drilling by Zalala on Pate Island in Block L4 in Lamu County which is in a gas-prone basin. If commercial quantities of natural gas are found, they are expected to go into power generation.
Tanzania has about 57 trillion cubic feet (tcf) of natural gas reserves in the southeast offshore areas. Although the country has legal, regulatory, and institutional framework in place, the processes for facilitating LNG export projects investment commitments have been slow prompting a blue-chip investor ExxonMobil to plan an exit. The LNG project construction is expected to commence in 2022 with first LNG exports in 2025
However Tanzanian has a success story in commercialisation of natural gas into power generation and industrial consumption in Dar es Salaam region using gas piped from the southeast. Natural gas currently contributes 44 per cent of a total 1500 mega watt(MW) national power generation after replacing expensive imported fuel oil.
Mozambique with about 180 tcf of natural gas reserves in the north-eastern Rovuma Basin adjacent to Tanzania gas discoveries, has registered the fastest developments with major global investors ( ENI, Anadarko, ExxonMobil) having committed investment decisions for LNG projects for first exports by 2022/23
The story of South Sudan is one of hope that the recent peace deal can allow the country to quickly go back to the original 350,000 bpd production at independence in 2011. Production is currently down to 120,000 bpd. The investors are ready to step up investments and production provided that political stability is sustained.
It is a positive investment oil and gas investment outlook for the region as long as reasonably high oil prices persist and governments facilitate the investments.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.