Emerging Opportunities for Industrialization:
Oil, Gas and Minerals
Amb. Dr. J. K. Kiplagat Director Industrial Information and Research
Ministry of Industrialization and Enterprise Development. P.O. Box 30418-00100.
Nairobi. [email protected]
Ministry of Industrialization & Enterprise Development
Promoting and Facilitating Industrialization
AFRICA INDUSTRIALIZATION DAY20TH NOVEMBER 2013,
Theme: Job Creation and Entrepreneurship Development: A Means to Accelerate Industrialization In Africa
The Standard Wed 20th November 2013
“President Kenyatta said Kenya recently discovered economically viable reserves of natural resources, among them
underground fresh water, coal, oil and natural gas
which will be exploited for the benefit of all Kenyans. “We are already reaching out to various Arab states to encourage their private investors to consider the opportunities in Kenya in the oil, natural gas and energy sub-sectors,” the President said.
President Kenyatta was speaking during the 3rd Afro-Arab Summit in Kuwait”
2
Every Kenyan City – Year 2030
Africa’s Vicious Circle
Low per Capita Income
Poor infrastructure
and support for investment
Less Funding for
Development
Programs
Reduced interest for Local and FDI in manufacturing
etc
UnemploymentHigh
Demand for Social Support
Challenges affecting Industrial DevelopmentKenya is seeking to industrialize in a highly competitive global environment
Inadequate Institutional framework
Low Value addition &
Diversification
Infrastructure, all including
Industrial land & ICT
Counterfeits and Sub standards
Low productivity and competitiveness
Access to affordable long term finance.
Limited Industrial Incentives
Low funding for R & D in industrial activities
ENERGY
Training in Science, Eng. Technology
Lack of harmonized Industrial
policies
Limited sector budgetary
support
EradicateExtreme Poverty
Achieve UniverlPrim. Edu
Dev.Global
Partnership SUSTAINABLE
DEVELOPMENT
Ensure environt.
sustain/bility
Combat HIV/AIDS,Diseases
Reduce Child
Mortality
R&D
Fixing the Problem
PromoteGender equality
ImproveMaternal Health
By meeting the 8 MDGsBy 2015!
EnergyPhysical infrastruct
GoodGovernance Industrialization
Access Finance
InstitutionalFramework
Training
R&D
Fix the Problem
Urgently
Historical: Review of Past Policies Import Substitution Policy (1970-1980’s) Structural Adjustment policies (1980 –
1990’s)Export oriented Strategies (1990’s onwards)Sessional Paper No. 1 of 1986 on Economic
Management for renewed growthSessional Paper No. 2 of 1992 on Small Enterprise
and Jua Kali development in KenyaSessional Paper No. 2 of 1997 on Industrial
transformation to the year 2020Economic Recovery Strategy for Wealth and
Employment Creation (2003 – 2007)Sessional paper No 9 of 2012 on National
Industrialization Policy Framework.
INTERVENTION THROUGH THE NIP
Vision, Mission & Goal of NIP• Vision: To enable Kenya become a regional
leader in industrial growth & development contributing upwards of 15% of the annual national GDP;
• Mission: To spur industrial economic growth by creating an enabling environment with targeted incentives in priority sectors that promote country-wide dispersal of industries in order to realize equitable economic empowerment for all Kenyans.
• Goal: To increase contribution of manufacturing sector to GDP by at least 10 per cent per annum.
Priority subsectors
Wood and Wood Industries
Paper and Paper Products
Meat and Dairy Products
Electrical and Electronic Products
Ceramics Industry Glass Industry Pharmaceuticals Industry
Recycling Materials
Packaging Industry
Fish and Fishery products
Petrochemicals Industry
Green Energy
Biotechnology Nanotechnology
Machine tools and spares
Leather and Leather Products
Agro Machinery and farm implements
Textiles and Clothing
Mining and Quarrying
Automotive and Auto parts
Iron and Steelindustry
Agro-processing &
Value addition
Thermal Power GenerationA fossil-fuel power plant burns fossil fuels coal,
natural gas or petroleum to produce electricityA nuclear plant uses energy from nuclear fission of
uranium or plutonium.Biofuels that can be burned to heat water.Geothermal energy from volcanic steam.Heat energy energy extracted from expanding gas,
steam or combustion gases is converted into mechanical energy, which then operates an electrical generator.
The prime mover may be a steam turbine, a gas turbine or, I.C engine.
Coal is the most abundant/usedfossil fuel on the planet.
11
Thermal Power GenerationA fossil-fuel power plant burns fossil fuels coal,
natural gas or petroleum to produce electricityA nuclear plant uses energy from nuclear fission of
uranium or plutonium.Biofuels that can be burned to heat water.Geothermal energy from volcanic steam.Heat energy energy extracted from expanding gas,
steam or combustion gases is converted into mechanical energy, which then operates an electrical generator.
The prime mover may be a steam turbine, a gas turbine or, I.C engine.
Coal is the most abundant/usedfossil fuel on the planet.
12
East Africa’s Mineral Resource Driven GrowthInvestment into Africa’s burgeoning oil
and gas sector is expected to rise in coming years as big oil companies and foreign investors from the US, Europe and Far East finance existing and new projects in the continent.
Foreign investors are excited by the “growth in Africa". “They are seeing the positive developments in Africa
They are seeing Africa as one of the primary growth vehicles of the future and they are willing to invest in it.
13
The Basin of Black GoldKenya's Great Rift Valley, a 450-mile-long
volcanic trench ripped open by shifting tectonic plates, is known as the cradle of mankind for the million-year-old remains of human forebears discovered there.
The area also holds a string of fields that could make Kenya, East Africa's largest economy a major energy producer.
The U.K.'s Tullow Oil, and Canada's Africa Oil found oil deposits that could yield 10 billion barrels:◦ enough to supply Kenya for three centuries.
“I've never seen a basin of this magnitude!” Africa Oil CEO
14
‘Foreign investors are keen to invest in the Kenya’s ICT, energy, infrastructure, pharmaceutical and agribusiness sectors.’ Business Daily
15
Black Gold within ours BordersKenya can now be likened to a fair lady
grabbing the attention of foreign suitors out to woo her to sign deals.
In a space of 30 days or so, hordes of foreign visitors have flown into Kenya’s capital, Nairobi. And no, they are not after the fun and sun this city in the Savannah of East Africa glows under. ◦ It is matters business.
A delegation of about 106 company representatives from Morocco made its way into the country first, followed by that of the United Arab Emirates (UAE). South Korea was next and followed by Hong Kong and Brazil.
16
Kenya seen as a gateway
These delegations are keen to invest in the country’s ICT, energy, infrastructure, pharmaceutical and agribusiness
Kenya is widely seen as a gateway into the hinterland of the East and Central African countries which are endowed with huge deposits of minerals too.
Oil is an economic catalyst, thus the rush of investors. 17
Coal, Titanium, Niobium&Iron Ore
Other minerals like coal in Kitui, titanium and rare earths in Kwale, Iron ore in Taveta and Homa Bay and fluorspar in Kerio Valley that are viable for commercial exploitation, has also signaled a welcome open door for investors.
Kenya’s technological advancement that is characterised by massive use of innovative products in financial, telecommunication and construction sectors could also explain the rejuvenated interest in the country.
18
Kenya’s index of doing business to rise
The single window system which is under the custodian of the Kenya Trade Network Agency (Kentrade) will integrate the functions of all government agencies involved in cargo certification process into an electronic one stop shop.
The anticipated benefits from the system will continue attracting investors.
Kenya is ranked position 121 out of 185 countries .With the system in place, the World Bank’s ranking of Kenya’s index of doing business is expected to spike significantly.
In addition, most foreign investors find Kenya’s workforce aggressive and competent, an essential ingredient for business success. 19
20
The Golden Lokichar Basin
From Grass to GloryKenya is headed to become the first oil
exporter in East Africa, moving in less than five years from being a have-not nation to the regional oil exporter.
After Tullow Oil Plc (TLW) discovered oil last year, Kenya is set to start shipments in 2016, overtaking neighboring Uganda, where Tullow found crude more than seven years ago.
Kenya's deposits may top 10 billion barrels, more than three times the U.K.'s remaining reserves.
21
The Golden Benefits!Oil will allow Kenya to:-
◦diversify export earnings and ◦act as a catalyst for infrastructural spending, especially on the transport network. Roads Railways Airports Ports
The shilling is expected to benefit from:- ◦inflows of foreign exchange and ◦reduced spending on fuel imports.
22
Ngamia, Twiga and Etuko.Kenya imports all its fuel, almost 80,000
barrels of oil a day at a daily cost of more than $8 million.
It relies on exports such as coffee and tea to support the balance of trade in the $37 billion economy.
Tullow estimates it has found more than 300 million barrels of oil in South Lokichar Basin. The wells are: Ngamia, Twiga and Etuko.
In February 2013, Twiga became the first well in Kenya to produce oil at a commercially viable rate and has the potential to produce 5,000 barrels a day. 23
After 50 years of disappointments!Between 1960 and 1992, prior to Tullow's entry, 30
wells were sunk around Lokichar area:-◦ 13 were dry, ◦ 12 encountered non-commercial gas shows and◦ five encountered signs of oil staining
The golden find is in Turkana County. Shipments will initially be made by truck or train for refining in Mombasa or exports. Once more fields are discovered and developed a pipeline can be built.
Kenya Petroleum Refineries Ltd., the nation's sole refinery, half-owned by Essar Energy Plc (ESSR), refines imported crude mainly from Abudhabi◦ It can now warm up for home grown raw material
24
Twas West Africa Now its East Africa
The continent's oil industry was centered on Nigeria in West Africa.
East Africa had been overlooked. Of the more than 30,000 wells drilled in Africa, fewer than 500 were in East Africa.
There was a giant underexplored hole on the map!
Most oil companies traditionally had focused on the African powerhouses of Nigeria and Angola to the west, and Libya and Egypt on the Mediterranean.
Now the world has woken up to East Africa. 25
26
After the Black Gold it is the Gas A consortium of companies searching for
minerals off the Kenyan coast said it had discovered 52 metres of natural gas reserves on Mbawa-1 well off the coast of Malindi.— giving Kenya its first ever gas find.◦the first hydrocarbon discovery offshore Kenya
The gas find was made at a depth of 2,553 meters and its operators said they intend to continue drilling to the depth of 3,275 meters, more in the hope of finding oil. 28
The BenefitsThe discovery of economically-viable reserves of
natural gas will help Kenya attract part of the huge investments arising from the global shift towards cleaner sources of energy.◦ Alot of investors are today keen on putting their
money in cleaner and sustainable sources of energy.
Though more expensive to produce and ship to the market it is preferred because: ◦ of its low pricing compared to oil and◦ its friendliness to the environment.
Natural gas has relatively high hydrogen content and burns about 50 per cent cleaner than coal and roughly 30 per cent cleaner than oil.
The higher the hydrogen content in fuel, the cleaner it is. 29
Natural Gas 2nd largest fuel source by 2025Natural gas will overtake coal to become the
second largest fuel source by 2025. Tanzania has received massive inflow of
foreign investment into its natural gas industry earning $2-$3 billion annually.
The gas is already being used to generate electricity and to power industries – ◦significantly reduce the cost of energy to
manufacturers and raise the country’s clean energy credentials.
The US Geological Survey estimates that more than 250 trillion cubic feet of natural gas may lie off Kenya, Tanzania and Mozambique coastline.
30
Role of Resources in African DevelopmentMineral Export Concentration, Selected Countries. 2005
(Percentage of Total Exports)
Country Main Export Other Exports
Botswana Diamonds 88.2%
Nickel 8.1
Chad Oil 99.9%
Ghana Cocoa 46 Manganese 7.2
Kenya Tea 16.8 Flowers 14.2
Nigeria Oil 92.2
S. Africa Platinum. 12.5
Coal 8; Gold 7.9
Tanzania Gold 10.9 Fish 9.7; Copper 8.6
Zambia Copper 55.8 Cobalt 7
Sub-Saharan Africa
Oil 49.2 Diamonds 12.6; Nickel 7.8
Map that shows distribution of minerals in Sub-Saharan Africa.
Bauxite is used to make aluminum. West Africahas large deposits of bauxite.
Africa is the world’s largest producer of diamonds.
Diamond mining in West Africa.
Drilled core of coal from Mui Basin
37
Drilling for coal assessment in Mui Basin
The highlighted zone on the map of Kenya traces the mineral rich area and it is evident that iron ore follows a consistent northwesterly trend from Taita to Meru along the foliation of metamorphic rocks.
38
Empirical Validity of the “Resource Curse”Countries that might have the
“Resource Curse”◦High mineral export dependence on one or a few minerals
◦Especially petroleum exporters (“Oil Economy Syndrome” )
◦High Foreign Exchange and Fiscal dependence on the resource export
◦High levels of Direct Foreign Investment in the resource sector
40
Before the Oil and Gas!
After the Oil and Gas!Petronas twinTowers
Should we go that way so that the City and the country is
lighted?!
41
High per Capita Income
Low Demand for Social Support
More Funding for Development Programs
Good infrastructure and support
for investment
Increased interest for Local and
FDI
EmploymentFood & Energy
SecurityDisease Free
AFRICA’S’S SUCCESS STORY