Just how much do the East African Community governments stand to gain from oil and gas exploration and extraction deals with foreign oil majors?

Will the governments use the revenue to lift millions of people out of poverty? Will the return on investment on the countries’ natural resources and the huge government spending on infrastructure ease exploration and extraction?

These are the questions in the minds of many but a new survey by the African Union-backed African Progress Panel paints a worrying scenario: International mineral extraction companies, mainly from Australia, Canada and China, are using complex ownership models to avoid tax in East African countries.


"Botswana’s key lesson has been that Africa’s natural resources belong to the people. In this way, diamonds became the country’s relative economic success,” said Linah Mohohlo, the governor of Botswana’s Central Bank and a member of the APP.

The APP said that while global mining firms listed on stock exchanges are more transparent, their unlisted counterparts bear the biggest blame in tax avoidance.

Commentators also blame African governments for failure to make proper scrutiny of the companies to which they award exploration contracts and absence of national policies on oil and gas.

“We should blame ourselves because before these companies are invited here, we should already have the right policies, the way the Gulf countries did. In the absence of policies on oil and gas, these issues will continue to arise and the continent will continue losing money,” said Israel Kamuzora, chairman of Africa Trade Insurance, a firm working with regional insurers to improve their capacity to underwrite oil and gas risks.

The bickering has started...

East Africa is in danger of throwing away part of its new-found oil wealth

http://www.economist.com...-part-its-new-found-oil

So an oil bonanza is in the offing. Revenues could lift millions out of poverty, but only if the oil can find an efficient way to market. The local fields are expensive to tap, say experts. A single pipeline could serve them all and would be the cheapest option, running to Lamu via Lokichar in north-west Kenya and beyond.

Building refineries makes no sense for east Africa. It would be wasteful and is unlikely to give countries the energy security they seek, as some of the fields will run dry quite soon. The economies of scale in refining are vast. Buying fuel from mega-refineries in Asia will be cheaper for a long time to come, even if it means losing some of the profits from processing.