The discovery of oil and gas can be a defining moment for nations. Managed well, it can have a transformative impact; boosting economies and fuelling inclusive growth across the board.
But without the right systems in place, a sudden boom in the extractives sector can have debilitating effects - including distorting economies and fostering conflict and insecurity.
East Africa has now secured its position as a big player for hydrocarbon exploration on the world stage. Major gas reserves in Tanzania and Mozambique. Substantial deposits of crude oil in Uganda and Kenya. The opportunities are huge. Now is the time to look to the hard lessons learned elsewhere and ensure the benefits are widely felt.
The UK is well placed to help. Over 50 years of experience in North Sea Oil and Gas has given the UK a global competence in all aspects of exploration and production. The Oil and Gas industry supports over 375,000 jobs in the UK. The top 2 UK firms listed by market capitalisation are in the extractives industry (Royal Dutch Shell and BP), and there is a wealth of UK companies leading the way in designing, financing and implementing oil and gas construction projects across the world.
The marine and subsea market alone is worth roughly $25 billion worldwide, with the UK accounting for almost half of that. British companies are also leading on wider oil-related infrastructure. 70% of current subsea infrastructure design is engineered in Scotland. And our firms are leading in consultancy and finance as well as construction.
British companies are working in this region to bring the investment, skills and knowledge which will help to drive the sector’s growth. Tullow Oil of course is a major player here in Kenya, and also very active in Uganda where they are one of 3 main operators.
Other companies such as BG Group and Ophir Energy are leaders in offshore gas exploration and have a presence in the region. These companies are committed to adding value into the East African economy, building local expertise and creating jobs.
Education and developing local content are also emerging as key areas for partnership. The University of Aberdeen last year teamed up with the University of Dar es Salaam on a $2m grant to help develop Tanzania’s oil and gas sector by developing local human resource capabilities. The 2 universities are working together to develop a curriculum across a range of energy-related disciplines including engineering, geosciences, social science, business and law.
UK companies are investing in education through scholarship programmes. The Tullow Group Scholarship Scheme has helped bridge the skills gaps in the oil and gas sector within the countries in which Tullow operates. 76 Kenyans have been awarded scholarships to UK universities and received postgraduate qualifications in the energy sector. BG Group runs a similar programme in Tanzania, with 34 scholarships having been awarded since 2012. The beneficiaries have all since returned to Tanzania, and have been recruited by locally-based oil and gas companies.
On a government level, the UK – with support from Germany – has designed the Skills for Oil and Gas Africa programme to maximise local employment in the regional oil and gas sector. The programme focuses on Kenya, Uganda, Tanzania and Mozambique, working closely with the private sector and government to equip local populations with the skills needed to seize job opportunities in the sector. The 5-year project is expected to help around 32,000 local people find sustainable jobs, with a contribution of £25m from UK Aid.
With the new discoveries of oil and gas across the region, we must get the business environment right for the exploitation of extractives in a sustainable and equitable way. We need to encourage investment whilst ensuring local populations benefit from revenues.
Critical issues remain around how revenues are shared between local communities, at county and national level. This is important to balance the benefits to countries as a whole and to ensure that the security and enabling environment in the oil producing areas is right.
The UK has long championed greater transparency in the oil, gas and mining sectors. We were instrumental in establishing the Extractive Industries Transparency Initiative (EITI), which sets a global standard for all extractives companies to report what they pay to governments, and for governments to report what they receive. The EITI has now been implemented by 51 countries (including the UK), and has so far seen disclosure of more than $2 trillion in revenues.
We have committed $30m towards the development of local content, technical advice towards developing legislation and regulation, research, and engagement with the industry and civil society.
And this year we started supporting the integrated planning for the LAPSSET Corridor. Substantial infrastructure investment is required in roads, railways, ports, power lines – all under the ‘LAPSSET’ banner which will enhance national and local revenues.
Ladies and gentlemen, the Industry in this region is not without challenges, but the future looks bright. And that’s been down to the willingness of East African Governments to come together - working with each other, with the UK, and with other partners - to resolve some of the biggest issues facing the region. This is a time of historic opportunity, and the UK - with its world-renowned expertise and skills – remains the ideal partner to help you realise this potential.