East Africa is emerging as a “hotbed” for energy-related investments, not only for its robust economic growth, but also for its potential to become one of the largest producers and exporters of oil and natural gas in the world, research firm Frost & Sullivan reports.
In its ‘East Africa Energy’ report, the firm outlined that countries including Tanzania, Kenya, Ethiopia and Rwanda, which traditionally depended on biomass to meet most of their energy requirements, were gradually shifting to modern energy sources to meet the growing demands of the expanding urban population and the rising per capita income levels.
The analysis further highlighted that East Africa would have more than 50 000 MW of generation potential by 2030, dominated by hydropower, coal, wind, geothermal power and natural gas-based generation systems.
More than 80% of the potential gas reserves in East Africa were concentrated around Mozambique and Tanzania.
“While liquefied natural gas exports from these countries were expected no earlier than 2020, rapid development of gas power projects will provide a short-term to growing electricity demand in the region,” the report said.
The region would, therefore, provide immense opportunities for companies specialising in oil and natural gas exploration and production, power generation and associated infrastructure, as well as renewable-energy technology commercialisation.
Frost & Sullivan energy and environment senior research analyst Neeraj Sanjay Mense added that energy development was gaining priority as East African economies sought to attain middle-income status over the next decade.
"In view of this objective, governments in the region are adopting strategies to diversify the energy mix, as well as encourage private sector participation,” he said.
Investment from the private sector was also critical as the East Africa energy reserves required substantial funding to reach full potential, which could not be met by government subsidies alone.
However, the report emphasised that issues pertaining to finance, political stability and security could limit private sector participation within the region, and private players would, therefore, need to align investment strategies with the developmental plans of the respective regions to be successful.
Further, the lack of adequate infrastructure and skilled resources escalated the costs of operation and stalled energy projects. Therefore, training local workers would ultimately aid the long-term sustainability of energy businesses in East Africa.
"An adoption of mechanisms to share technical knowledge through international cooperation will ensure steady growth. Collaboration with experienced project developers will also be imperative to accelerate technological advancements and implement the respective plans within the East African energy sector," observed Mense.