African Unification Front
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ENERGY STATS FOR THE GLR
The African Union's Great Lakes Region includes republics surrounding Lake Kivu, Lake Tanganyika, and Lake Victoria. DRC, Burundi, Kenya, Rwanda, Tanzania, and Uganda have a combined population of 132 million, and an estimated gross domestic product (GDP) in 1999 of about $30 billion.
The economies of the Great Lakes region states have different structures, and are at various stages of development. Uganda's economy grew at an estimated 4.9% in 2000, while Kenya's GDP grew at .9% for the same year. Among the countries of the region, the rate of inflation ranged from 8.5% in 2000 in Kenya, to -2.4% in 1999 in Rwanda. In 2000, the Great Lakes region had a $145 million merchandise trade deficit with the United States on U.S. exports of $331 million and U.S. imports of $185 million.
ENERGY OVERVIEW
In 1999, the Great Lakes region nations collectively (excluding the DRC) consumed 0.25 quadrillion British thermal units (Btu) of commercial energy (0.065% of the world's total) and generated about 3.4 million metric tons of carbon emissions (0.055% of the world's total). Kenya accounted for over 60% of the region's commercial energy consumption in 1999. Due to the relatively small urbanized population in the region, access to commercial energy sources is limited. The majority of the Great Lakes region population still relies on biofuel (wood, animal waste, etc.) as their primary fuel source. According to the World Bank, the number of regional inhabitants with access to electricity in 1996 ranged from 2.1% in Burundi to 8% in Kenya. Commercial energy resources in the region include coal, natural gas, hydroelectricity, geothermal, and possibly some oil. In 1999, 78% of electricity in the region was generated by hydroelectric plants, 18% by geothermal.
OIL
Great Lakes region oil consumption averaged about 76,000 barrels per day (bbl/d) in 1999, almost all of which was imported. The transportation sector consumed about 50% of the total, followed by the industrial sector (16%). Kerosene is used extensively in rural areas for lighting and, in urban areas, for cooking and lighting. The countries of the region are attempting to discourage the use of wood fuel through joint provision of and promotion of the use of liquefied petroleum gas (LPG).
Beginning in mid-1999 and continuing through 2000, oil and fuel prices increased in nearly all of the Great Lakes nations, contributing significantly to elevated rates of inflation. In Rwanda, for example, higher prices for imported oil products, combined with a steady depreciation of the Rwandan franc against the U.S. dollar caused transportation prices to increase by 40% from January through August 2000. The higher transportation costs, in turn, contributed to even higher fuel prices at retail outlets. In Kenya, where the shilling has fallen sharply in value against the U.S. dollar since mid-1999, rising fuel prices in 2000 prompted the Kenyan parliament to approve the creation of a regulatory board to control the prices of oil products. The government in Nairobi also agreed to allow the Kenya Transport Association to directly import oil products, thereby bypassing the eight multinational oil companies operating in Kenya. The companies were accused by government officials of market collusion over the increases in fuel prices. In Tanzania, rising fuel prices in 2000 also prompted the government to create a regulatory body to oversee the petroleum industry, which was liberalized between 1997 and 1999. In Burundi, where fuel prices are set by the government, petroleum dealers went to strike in July 2000 to protest the government's unwillingness to increase fuel prices at the pump. In October 2000, the government in Bujumbura raised retail fuel prices, citing the high price of international crude oil.
Kenya has no oil reserves of its own, and must import all of its 52,000 bbl/d consumption (see Table 3). Most Kenyan oil companies import their oil from Abu Dhabi's National Oil Corporation (Adnoc). The Kenyan government has spent about $169 million exploring for oil and natural gas over the past 15 years. Over 30 wells have been drilled so far, but with no success. In July 2000, the Kenyan government signed an eight-year contract with the British oil firm Star Petroleum to carry out exploration in three zones in Lamu and Kwale districts. The identified blocks, L5, L7, and L10, are partly offshore, cover an area of over 13,000 square miles, and account for over 60% of Kenyan offshore waters. Star Petroleum plans to drill at least six wells at a cost of $100 million.
Tanzania relies exclusively on imports for its oil needs. While foreign oil prospectors have invested more than $242 million in search of oil in Tanzania without success since 1981, the government in Dar es Salaam continues to encourage oil exploration in the country. State-owned Tanzania Petroleum Development Corporation (TPDC) has signed several joint venture agreements with foreign oil exploration companies in recent years. In 1997, Canadian companies Antrim Resources and Canop Worldwide Corporation signed separate production sharing agreements (PSAs) over Pemba/Zanzibar and Dar es Salaam/Mafia regions. In 1998, Gulf Western Mining signed an agreement for parts of the Tanga and Indian Ocean offshore regions. In May 1998, four firms--Ireland-based Dublin International, Songo Songo Development, Antrim Resources and Canop--were awarded exploration rights. In December 2000, Dublin International announced the drilling of a new exploratory well in the 1.25-million-acre Mandawa concession.
In August 2000, TPDC and a UK joint venture firm, Western Geophysical, completed the first comprehensive survey of oil deposits on the Indian Ocean floor off Tanzania's coastline. Western Geophysical brought in a specialized prospecting vessel to conduct the survey, which was designed to shed light on the possibilities of striking oil offshore. Experts have long suspected that there are considerable hydrocarbon reserves off Tanzania's coast. Data from the $11-million project was sold to interested oil companies as part of a new licensing round, launched in September 2000. The licensing round, set to close in April 2001, will open up over 24,000 square miles of deepwater acreage to exploration by dividing the Mafia Offshore Deepsea Basin, stretching from Mnazi Bay in the south to Dar es Salaam in the north, into six licensing areas. A second licensing round covering deepwater acreage to the north of Dar es Salaam could be launched as soon as July 2001.
Although Uganda has no proven oil or gas resources, some exploration is taking place, and there are signs that the western Rift Valley may contain hydrocarbon deposits. Landlocked Uganda is dependent on the importation of refined petroleum mainly from the Mombasa refinery in Kenya. Oil products are transported from Mombasa to Nairobi and Eldoret by pipeline and from there to Kampala by tanker trucks. An alternative supply route through Tanzania has been developed running from Dar es Salaam to Mwanza by railroad and onto Jinja by lake ferry.
Shell, TotalFina Elf, Agip and Caltex are the dominant players in Uganda's oil sector. Uganda's high oil prices are due mostly to high transportation costs and taxes. Uganda's annual consumption of oil products is estimated at about 7,000 bbl/d, and a quarter of the country's total revenue comes from taxes on oil. There are 20 refined product storage depots, with a total capacity of 365,000 barrels (two-thirds owned by oil companies and one-third by the government). At the beginning of 1994, Uganda's oil industry was deregulated and prices were liberalized.
Uganda spends approximately $120 million, or about 12% of its GDP, on imported oil products annually. The rising price of imported oil products has accelerated Uganda's efforts to develop its domestic oil resources. Energy Ministry officials have stated that there is "enormous potential" in an area known as Albertine Graben, which spreads from Lakes Edward, George and Albert in western Uganda to Rhino Camp basin in West Nile. Oil is visible on the ground in numerous places such as Kibuku in the Semliki basin. While financial difficulties forced Hardman Petroleum to abandon its license for the Lake Albert region in January 2000, other international oil companies, such as the China National Petroleum Corporation, have shown a growing interest in oil exploration in Uganda.
Based on 1999 seismic studies, Heritage Oil identified potential oil deposits at Rhino Camp in the Pakwach basin area, northern Lake Albert basin, southern Lake Albert basin, River Semliki basin, and Lake George and Lake Albert basin area. Company officials stated that the seismic surveys revealed a potential of nearly one billion barrels of oil. In cooperation with the Zhongyuan Petroleum Exploration Bureau of China, Heritage Oil is scheduled in early 2001 to drill two exploratory wells to confirm the results of the seismic tests.
Pipelines
In May 1999, the Kenyan and Ugandan governments announced plans for an oil pipeline from Eldoret in western Kenya to Kampala, Uganda. The plans were finalized in a formal agreement signed by the two nations in October 2000. Construction of the pipeline extension is set to begin in April 2002. The line will be constructed over four years, under the auspices of the EAC. The $80-million, 16,500-bbl/d pipeline will supply Uganda, Rwanda, Burundi, northwestern Tanzania and eastern Democratic Republic of Congo. It is expected to cut the price of oil in Uganda by almost half. Uganda imports most of its oil through Kenya's Mombasa refinery. The petroleum products are then pumped through the existing pipeline to Eldoret, where trucks and railway tankers transport them to Uganda and other countries of the Great Lakes region.
A protracted dispute at the Eldoret depot during the summer of 2000 severely disrupted the distribution of oil products throughout the Great Lakes. In July 2000, truck drivers who distribute petroleum products from the depot went on strike, accusing the Kenya Pipeline Corporation of preventing transporters from carrying the maximum amount fuel cargo. According to the drivers, the light loads transported to Rwanda, Burundi and the Congo, combined with fees paid at weighbridges in Kenya, eliminated the drivers' profit margin. By late August 2000, the number of long-haul trucks filling up daily at the depot had fallen from over 30 prior to the dispute to 7, prompting acute shortages of fuel in the region.
Refining
There are two oil refineries in the Great Lakes region -- one in Kenya and one in Tanzania. The Kenya Petroleum Refinery-Mombasa unit has crude processing capacity of 90,000 bbl/d, and Tanzania's Kigamboni Dar es Salaam-Tanzanian & Italian Petroleum Refining facility has 14,900 bbl/d. Kenya's refinery has been operating well below capacity and has struggled financially since the 1994 liberalization of the of the oil sector, which allowed local oil marketers to import finished petroleum products directly into the country. Although investors have spent approximately $45 million to upgrade and automate the refinery since 1997, it has continued to operate at 60% below capacity. In June 2000, the Kenyan government, which owns a 50% stake in the refinery, announced plans to divest its shares. The World Bank has urged Tanzania to shut down its refinery, on the grounds that it is no longer competitive following the liberalization of the petroleum industry. In February 2000, the director of the refinery concurred, stating that the refinery would soon cease to process crude oil. The refinery, which had been closed since November 1999 due to a payment dispute with TPDC, will continue to act as a storage depot.
NATURAL GAS
Rwanda and Tanzania currently are the only two nations in the Great Lakes region with proven natural gas reserves (see Table 4). Although natural gas is not produced or consumed in the region at present, several projects have been identified for expanded use of this resource. In Tanzania, a project to exploit natural gas in the country's largest known field -- on Songo Songo Island, located in the Indian Ocean southeast of Dar-es-Salaam -- will soon be entering its final phase of development thanks to a proposed $200-million World Bank loan, the terms of which are expected to be finalized by March 2001. The project was to have been completed in 1998 by Canada-based Songas, a joint venture between TransCanada Pipeline and Ocelot Energy. The $375-million project has faced numerous delays, however, due in part to a surplus of electricity generation capacity in the Tanzanian market. In August 2000, TransCanada Pipeline sold its 49% stake in Songo Songo to a subsidiary of the U.S.-based AES Corporation. The project involves a 140-mile pipeline from Songo Songo to a gas-fired plant in Dar-es-Salaam to provide fuel for a major thermal power plant and other industrial users. Once the project is completed, the five liquid fuel turbines at the 112-MW Ubungo power plant will be converted to gas and the power generated by the plant will be fed directly into the national grid. Songo-Songo's reserves are estimated at 1 trillion cubic feet (Tcf).
COAL
Tanzania is the only country in the Great Lakes region with significant coal resources. Total recoverable coal reserves in the Lake Victoria region amount to 220 million short tons (see Table 5). The primary use of coal in the region is in the generation of electricity. In May 1999, China's Hunan International Economic and Technical Cooperation Company bought 62% of Tanzania's Kiwira coal mine. The Tanzanian government kept a 38% share. Kiwira, situated in southern Tanzania near the border with Malawi, could become East Africa's largest coal producer. The new company, Tanzania-China Kiwira Coal and Power, plans to triple annual output to 300,000 tons both for domestic use and for export, mainly to China.
In November 2000, the Kenyan Ministry of Energy announced that it was budgeting $500,000 for coal prospecting in order to diversify its fuel sources for electricity generation. Hydroelectric power currently accounts for over 70% of Kenya's electricity generation. The Ministry of Energy plans to search for coal in the Mui and Mutitu basins in Mwingi and Kitui districts.
ELECTRICITY
In 1999, installed electric generating capacity for the Great Lakes region totalled about 1,800 million kilowatts (MW). Electricity generation for the region in 1999 was 8.07 billion kilowatthours (Bkwh), the majority of which--6.33 Bkwh--was hydroelectricity (see Table 6). Total Great Lakes region electricity consumption was 7.52 Bkwh. Kenya, Tanzania and Uganda are developing plans to share power supplies, including a regional energy interconnectivity plan that will enable any EAC country to connect with another nation's electricity supply. Among the nations of the region, Uganda has the biggest hydropower potential (from the Nile River) and would play a major part in any power-sharing project.
Kenya began rationing power in September 1999 due to a severe, prolonged drought. Given Kenya's heavy reliance on hydroelectricity, the drought produced accute power shortages in the country; shortfalls varied between 154 MW and 360 MW in off-peak and peak hours, respectively. By May 2000, electricity generation in Kenya had fallen by 40%, prompting the Kenyan government to deploy 180 mobile generators throughout Nairobi. Later that same month, the Kenyan government announced more stringent power rationing; residential power was cut from sunup to sundown and industrial power was stopped from sundown to sunup. In June 2000, Nairobi agreed to the accelerated construction of two, 55-MW, diesel power generating plants at a cost of $135 million. Located in the towns of Lanet and Eldoret, the two plants are scheduled to come online by July 2001. In August 2000, contracts were signed for construction of 105-MW power plants in Embakasi and Ruaraka. The government also announced plans to signficantly expand the storage capacity of the Masinga Dam, ensuring hydroelectric generation for over a year. In January 2001, the drought having subsided and electricity generation having increased, Kenya's Energy Minister ended the country's 15-month power rationing measures.
Kenyan government officials blamed the crippling energy crisis -- the shortfall cost Kenya nearly $100 million per month -- on the World Bank, which suspended assistance to Kenya in the early 1990s. The World Bank resumed lending to Kenya in 1997, but the interruption caused a multi-year delay in the development of power generation plants, including Kipevu 1 and Kipevu II (75 MW each), Olkaria II and III (64 MW each), Sondu Mirui (60 MW), and a third unit at Gitaru Hydro (72 MW). In November 2000, the World Bank approved a $72 million credit to the Kenyan government to finance electric power purchases from three independent power producers contracted by Nairobi. The World Bank also urged the Kenyan government to set a timetable for the privatization of the Kenya Power and Light Company and the Kenya Electricity Generating Company.
The drought in the region also contributed to blackouts and power rationing in Tanzania. As water levels at the Mtera hydroelectric dam fell below minimum, the Tanzania Electric Supply Company (Tanesco) was forced to rely more heavily on gas-powered generators, which are relatively expensive to operate. Tanesco, the country's sole producer and supplier of electricity, already faced a severe budgetary shortfall, due largely to a $61.3-million bill for past electricity consumption owed to the company by the Tanzanian government. In November 2000, Tanesco announced nationwide power rationing, explaining that it was unable to pay for further gas-fueled production. The rationing was designed to cut consumption by 35% by cutting the supply of electricity 16 hours per day. By January 2001, the power rationing program was suspended thanks to heavy rains which replenished the resevoirs at Mtera.
Tanesco has been working to develop a number of power projects. Construction was completed on the Kinansi hydroelectric dam in April 2000. Kihansi, located 341 miles southwest of Dar Es Salaam, has a capacity of 180 MW but has been operating at nearly 50% capacity due to on-going efforts to save a rare species of toad threatened by the dam. Other projects include the Malaysian 100-MW IPTL power project (currently on hold), the 37-MW Songo Songo gas project, and U.K.'s Agrreko 100-MW power project. In late January 1998, the Tanzanian government signed an agreement with Tornado Resources for the development of a $32.5-million natural gas-fired, electric power project in southern Tanzania. The project uses gas from the 500-Bcf Mnazi Bay gas field in the town of Mtwara, transported through a 16-mile gas pipeline, to a 20-MW power plant.
In January 2001, Tanzania, Kenya and Zambia agreed to implement cross-border electricity trade, a two-year project estimated to cost over $153.5 million. The project will entail the construction of 372 miles of power lines from Zambia to Mbeya, and from Arusha to Nairobi. Given its connection to the SADC power grid, Zambia will be able to sell low-cost and reliable electricity to Kenya and Tanzania.
Uganda played a role in alleviating the power crisis in Kenya by exporting electricity to the East African country from the Kiyara Power Station, a $230 million extension project in Jinja completed in June 2000. In its final phase, Kiyara will have an installed capacity of 240 MW. According to load forcasts by the Ugandan and Kenyan power utilities, Kenya will need to double its importation of electricity from Uganda by 2004. President Museveni predicted in May 2000 that Uganda would significantly raise its electricity exports to Tanzania and Rwanda.
Uganda is seeking $1.69 billion in foreign investment over the next ten years to upgrade its energy sector. In April 1999, British consultants carried out a national energy plan for Uganda which later received government approval. The plan listed five electricity generation units, including the Bujagali hydroelectric facility (250 MW-2,000 MW), Karuma dam (100 MW-200 MW), promoted by Norpak, and the rehabilitation of the Nalubaale dam (formerly the Owens Falls dam) (180 MW) and its extension (five units of 40 MW each). Under the plan, Uganda's government is to retain ownership of existing power stations, but will be able to cede them to private operators under leasing agreements.
In May 2000, the government of Uganda announced plans to privatize the state-owned national utility, the Uganda Electricity Board (UEB) in 2001. Officials in Kampala also pledged in April 2000 to increase rural electricity coverage from the current one percent to ten percent over the next ten years.
In November 2000, Rwanda and Burundi announced plans for the joint construction of the Ruzizi III hydroelectric dam on the Ruzizi River along the Rwanda-Burundi border. In July 2000, the Burundi National Assembly voted to liberalize its electricity sector, ending the monopoly of the state electric utility.
Renewable Energy
Kenya has two steam stations, the Okaria Geothermal Power Station (45 MW) and the Kipevu Thermal Station (45.5 MW). Nairobi is promoting additional geothermal power, and hopes to increase its production threefold by 2003 when two new geothermal power plants, totaling 72 MW at a cost of $155 million, are completed at Olkaria. Construction of the 64-MW Okaria II plant began in January 2000 and by October 2000 was injecting 13 MW into the national grid. Kenya currently produces about 0.4 bkwh of geothermal power, about 10% of total output. The Kenyan Energy Ministry estimates that Kenya has a potential for over 2,000 MW of installed capacity of geothermal electricity, second only to New Zealand.
In November 2000, China pledged to fund a $180,000-solar-energy project designed to provide energy to rural Kenyan educational institutions over the next two years. Similarly, U.S.-based NGOs donated $600,000 worth of solar equipment to Uganda and other countries of the region. Ugandan banks also launched a program in July 2000 designed to extend credit to local entrepreneurs needing solar equipment.
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