Smaller oil explorers willing to take financial and operational risks will lead the development of East Africa's oil and gas industry as majors ditch riskier projects as margins fall, executives from several oil and gas firms said on Tuesday.
The region has emerged as a significant prospect for the export of liquefied natural gas (LNG) because of the size of natural gas discoveries there and its proximity to Asia's major LNG consumers.
The U.S. Geological Survey has estimated that more gas lies off the shores of Kenya, Tanzania and Mozambique than off Nigeria, Africa's biggest energy producer.
However, high development costs and low profit margins in the gas sector worldwide have made large oil and gas companies more hesitant to commit to risky and expensive investments.
This reluctance paves the way for smaller explorers, such as Tullow Oil and Ophir Energy, who typically focus their efforts on one region or country in the hope of maximising any returns.
"The oil and gas industry is worried about costs. Oil companies are reducing their investments and putting projects on hold," Willy Olsen, former advisor to Statoil, said at the East Africa Oil and Gas conference in London.
"If they make oil and gas discoveries in East Africa it will be 10 to 15 years before they see revenues ... so the focus will be on small and medium-sized companies and few big players," he added.
