As Oil Prices Soar, This Time, It May Be East-Africa's Turn!

 

 

As Oil Prices Soar, This Time, It May Be East-Africa's Turn!
BY Yousuf A.Abdi-Odowaa

London, UK

The recent oil price spike, which shot up in the past few weeks to a new historic high of $45 a barrel, and at the fastest pace in more than twenty years, is believed to be a structural phenomenon, which is set to have a long-lasting impact on the world economy. This recent price shock has been brought about by combinations of normal economic fundamentals; a shortage of supply and a limited capacity by the world’s leading suppliers, faced by a rapid increase of demand, driven mostly by the phenomenonal economic growth of China and India.

Coupled with the geopolitical factors ranging from the effects of September 11, 2001 attacks in the United States to the recent Al-Qaida attacks in Saudi Arabia, which has always been considered the world’s central banker to the oil market. Not to mention the situation in Iraq, and the ever-deteriorating domestic troubles of Venezuela and Nigeria.

Coming back to the theme of this article; the doomsday predictions and the uncertainties surrounding the long- term sustainability of the flow of oil from the OPEC countries has had a positive impact on Africa, and in particular in East Africa, including SOMALILAND.

This is because high oil prices increase the economic viability of new oil exploration and production at high-cost and high-risk sites. Thus, East-Africa is becoming an increasingly interesting site for oil exploration and production, which should lead to strongly enhanced investments. As already reported, new evidence suggests possible oil reserves in East Africa, stretching from ‘Madagascar to the tip of Somaliland’. This has prompted several major oil
exploration companies to begin drilling in Tanzania, and at least three other companies, including the oil giant Royal Dutch Shell, are
searching off the coast of Tanzania. Other companies from the United States, Britain, Australia, Malaysia, and Denmark are also exploring offshore in Kenya, Madagascar and Mozambique.

As disclosed in the budget of 2004-5, Somaliland has earned $500,000 from companies surveying S/Land’s coast for oil explorations, some S/land independent observers have even put this figure close to a $1 million! Its also understood that the present administration of S/land has entered negotiations with South African, Malaysian and a Canadian oil exploring companies, but is understandably, guarding these negotiations from the media, in fear of Somaliland’s enemies gate-crashing the party, by accusing these companies of breaking and hence, fuelling S/land’s secession from the rest of Somalia, A
charge that could have serious economic ramifications on these companies.

However, For S/land’s untapped resources to bear fruit sooner than later, with or without recognition, it needs to lure more aggressively the international oil investors to the potential gains from Somaliland’s oil reserves.

The renewed search for oil has heightened hopes in East of Africa, as it could potentially soon join the ranks of Africa's major oil producers and reap enormous financial rewards. BUT critics of oil exploration in East Africa say Sudan, along with Nigeria and Angola, are examples of how promised billions of
dollars in oil revenue have failed to alleviate poverty and have only deepened government corruption and internal conflicts.Therefore, it’s a must that a good governance, accountability, transparency, and well-functioning legislative chambers and institutions with sound economic development programs are put in
place, if Somaliland and its likes in East Africa, are to learn from the mishaps of their west African counterparts. If not, petrol dollars could have mixed blessings for East of Africa!