Emerging opportunities for Industrialization Oil Gas and Minerals aid 20-nov-2013


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Emerging opportunities for Industrialization Oil Gas and Minerals aid 20-nov-2013

  1. 1. AFRICA INDUSTRIALIZATION DAY 20TH NOVEMBER 2013, Theme: Job Creation and Entrepreneurship Development: A Means to Accelerate Industrialization In Africa 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. Kenya. jkkiplagat@yahoo.co.uk Ministry of Industrialization & Enterprise Development Promoting and Facilitating Industrialization
  2. 2. 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
  3. 3. Every Kenyan City – Year 2030
  4. 4. Low per Capita Income Unemployment High Demand for Social Support Africa’s Vicious Circle Reduced interest for Local and FDI in manufacturing etc Less Funding for Development Programs Poor infrastructure and support for investment
  5. 5. Challenges affecting Industrial Development Kenya is seeking to industrialize in a highly competitive global environment Inadequate Institutional framework ENERGY Low productivity Counterfeits and and Sub standards competitiveness Training in Science, Eng. Technology Low Value addition & Diversification Infrastructure, all including Industrial land & ICT Access to affordable long term finance. Limited Industrial Incentives Lack of Low funding for harmonized Industrial R & D in industrial policies activities Limited sector budgetary support
  6. 6. Fixing the Problem Eradicate Extreme Poverty Dev. Global Partnership By meeting the 8 MDGs By 2015! Achieve Univerl Prim. Edu Promote Gender R&D equality SUSTAINABLE DEVELOPMENT Ensure environt. sustain/bility Combat HIV/AIDS, Diseases Improve Maternal Health Reduce Child Mortality
  7. 7. Fix the Problem Physical infrastruct Energy R&D Good Governance Industrialization Training Access Finance Institutional Framework Urgently
  8. 8. 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 growth  Sessional Paper No. 2 of 1992 on Small Enterprise and Jua Kali development in Kenya  Sessional Paper No. 2 of 1997 on Industrial transformation to the year 2020  Economic Recovery Strategy for Wealth and Employment Creation (2003 – 2007)  Sessional paper No 9 of 2012 on National Industrialization Policy Framework. 
  9. 9. 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.
  10. 10. Priority subsectors AgroMachine tools Agro Machinery Iron and Steel and farm processing & industry and spares implements Value addition Wood and Wood Paper and Paper Automotive Textiles and Industries Products and Auto parts Clothing Meat and Dairy Leather and Products Leather Products Electrical and Electronic Products Mining and Quarrying Ceramics Industry Glass Industry Pharmaceuticals Industry Recycling Materials Packaging Industry Fish and Fishery products Petrochemicals Industry Green Energy Biotechnology Nanotechnology
  11. 11. Thermal Power Generation        A fossil-fuel power plant burns fossil fuels coal, natural gas or petroleum to produce electricity A 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/used 11
  12. 12. Thermal Power Generation        A fossil-fuel power plant burns fossil fuels coal, natural gas or petroleum to produce electricity A 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/used 12
  13. 13. East Africa’s Mineral Resource Driven Growth Investment 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
  14. 14. The Basin of Black Gold Kenya'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
  15. 15. ‗Foreign investors are keen to invest in the Kenya‘s ICT, energy, infrastructure, pharmaceutical and agribusiness sectors.‘ Business Daily 15
  16. 16. Black Gold within ours Borders   Kenya 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 16
  17. 17. 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
  18. 18. 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  18
  19. 19. 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  19
  20. 20. The Golden Lokichar Basin 20
  21. 21. From Grass to Glory Kenya 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
  22. 22. 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
  23. 23. 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
  24. 24. After 50 years of disappointments! to Tullow's entry, 30  Between 1960 and 1992, prior 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
  25. 25. 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. 26. 26
  27. 27. 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 28
  28. 28. The Benefits  The 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 
  29. 29. Natural Gas 2nd largest fuel source by 2025 Natural 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
  30. 30. Role of Resources in African Development Mineral Export Concentration, Selected Countries. 2005 (Percentage of Total Exports) Country Main Export Other Exports Botswana Diamonds 88.2% Oil 99.9% Cocoa 46 Tea 16.8 Oil 92.2 Platinum. 12.5 Gold 10.9 Copper 55.8 Oil 49.2 Nickel 8.1 Chad Ghana Kenya Nigeria S. Africa Tanzania Zambia Sub-Saharan Africa Manganese 7.2 Flowers 14.2 Coal 8; Gold 7.9 Fish 9.7; Copper 8.6 Cobalt 7 Diamonds 12.6; Nickel 7.8
  31. 31. Map that shows distribution of minerals in Sub-Saharan Africa.
  32. 32. Bauxite is used to make aluminum. West Africa has large deposits of bauxite.
  33. 33. Africa is the world‘s largest producer of diamonds.
  34. 34. Diamond mining in West Africa.
  35. 35. Drilled core of coal from Mui Basin Drilling for coal assessment in Mui Basin 37
  36. 36. 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
  37. 37. 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
  38. 38. Before the Oil and Gas! After the Oil and Gas! Petronas twinTowers 40
  39. 39. Should we go that way so that the City and the country is lighted?! 41
  40. 40. High per Capita Income Employment Food & Energy Security Disease Free Low Demand for Social Support AFRICA’S’S SUCCESS STORY More Funding for Development Programs Increased interest for Local and FDI Good infrastructure and support for investment