Independent and small-scale oil companies like to be quick on their feet, beating the energy giants time and again in the exploration race. But in some of Africa’s more promising energy areas, regulatory hurdles and resource nationalism are starting to hold things up.

London-based Heritage Oil are involved in ongoing arbitration in a UK court over capital gains tax disputes related to its sale of Ugandan assets to Tullow Oil, for which Tullow paid $1.45bn. The Ugandan Revenue Authority says income tax is due on the capital gain arising from the disposal. Heritage disagrees.

In a similar case, the Kenyan government is reportedly blocking the transfer of oil exploration stakes which come as part of the August acquisition of Cove Energy by the Thai national petroleum company PTT. Kenya’s energy minister said: “This company has done absolutely nothing. So, we cannot sit back as a government and allow somebody to trade a piece of paper for 3 billion shillings. We want a share of that money to be able to transfer to a third party”

Even companies moving away from the conventional minnow model – find oil, sell the discovered reserves and move on – are running up against hurdles. Tullow Oil has moved into the production in the last few years, hoping its development assets can fund further exploration, thus avoiding the need to raise fresh equity.

So far, the strategy is working out. The company has around $3.5bn worth of reserves-based lending facilities in place, meaning it can spend around $1bn a year on exploration. But in Uganda, life as a producer is proving tricky. Specifically, Tullow differs with the government over its plans for a 120,000 bpd refining facility. Since oil companies often need an export market for their products, a large in-country refinery is problematic. Tullow chief executive Aidan Heavey told Africa Energy: “As a consortium we are drilling out all the exploration prospects, appraising all the fields and then it will come to a stop until such time as the development plans are approved.” Ugandans might look enviously at Ghana, which found oil at around the same time, but is already pumping. One reason is that the geography is different. Uganda’s oil is 1,300 miles from the nearest port, whereas in Ghana “you just bring it to the surface, put it in a tanker, and off it goes,” says Thalia Griffiths, editor at Africa Energy.

There is also Ghana’s experience in other extractive industries which helps things along. East Africa, meanwhile, is turning out to be “a learning curve for everyone involved” Griffiths says. Oil and gas commentator Duncan Clarke, Chairman and chief executive of Global Pacific & Partners in Johannesburg, is rather alarmed at the region’s trends. “The curse of resource nationalism has reared its head in Africa. This has taken the form of new taxes, imposts and burdensome regulatory controls on the industry and corporate players, slowing development and complicating investment choices, thereby disrupting the timing and process of capital allocation and investment inflows”.

Along with Uganda’s interrupted exploration cycle, Clarke adds that “Tanzania is shaping new and more onerous arrangements for gas, and now Kenya has expressed intent to take 25 per cent of production ventures. All this is unbalancing the commercial landscape”.

Resad in thisisafricaonline.com