Tanzania: CHADEMA politician, Zitto Kabwe, to consider defecting to new party

Menas Associates understands that opposition politician Zitto Kabwe is considering announcing his defection from CHADEMA to a newly established party, the Alliance for Change and Transparency (ACT).

Kabwe – universally known as Zitto – has been a CHADEMA member since his teenage years. He has represented the Kigoma North constituency since 2005 and, at 29, is still the youngest MP ever to be elected in Tanzania. He made his name in 2007 with a call for an inquiry into the granting of a Special Mining Licence to Barrick Gold for the Buzwagi Gold Mine that year. Though the inquiry was never instituted, it led to a review of mining legislation that led to the Mining Act of 2010.

Since then, Kabwe impressed as the chairman of the Public Organisations Accounts Committee between 2010 and 2013, and thereafter with the Public Accounts Committee. In recent years his ambition has made him enemies within CHADEMA’s leadership. This culminated in him being removed from all party offices in November 2013. His legal challenge is still in the courts. 

A key issue for him now is the management of Kenya’s natural resources. Kabwe was instrumental in getting Statoil’s natural gas terms into national and international media after they were leaked. He was also instrumental in drawing attention to illicit financial flows out of Tanzania and tax avoidance schemes made through mispricing and the use of shell companies. He does, however, remain sympathetic towards investors and has maintained good relationships with major companies, including Barrick Gold and BG. 

If he does move to the ACT, he would be unable to run for the presidency as he is under 40 years of age. He has in the past stated that his current term would be his final one as an MP, although that may change now that he is considering joining the ACT. Whatever he decides, Kabwe’s commitment to the management of Kenya’s natural resources will ensure he remains a national figure to watch.

For more news and expert analysis about the political, security, and business issues affecting East Africa, please see our East Africa Politics & Security publication.

© 2014 Menas Associates

Dana Gas: Favourable ruling in Iran and Crescent Petroleum Tribunal

UAE-based energy firm Dana Gas has released a statement that an international tribunal has issued a favourable ruling in the dispute over a natural gas supply contract between Iran and Dana’s largest private shareholder, Crescent Petroleum.

The tribunal ruled that a 25-year contract for National Iranian Oil Co (NIOC) to supply gas to Crescent was valid and legally binding, and that NIOC had been obligated to deliver gas since December 2005, Dana said on 9 August.

NIOC and Crescent signed the 25-year contract in 2001, with the price tied to oil. Deliveries were delayed, however, as oil prices rose and some Iranian officials and politicians called for a revision to the gas pricing formula.

Crescent Petroleum initiated arbitration proceedings in July 2009; a three-person arbitration tribunal was formed under the terms of the 2001 contract.

According to Dana, NIOC first introduced gas into its transmission network and Dana’s UAE processing facilities for commissioning purposes in July 2010. The system had to be shut down again, however, when leaks were discovered in the transmission system.

Dana did not state when it expected gas supplies to start flowing again, but a source familiar with the matter said that supplies would not begin in the near term as subsidiary agreements needed to be reached and infrastructure work completed.

The contract provides for the UAE to import some 600 million cubic feet of Iranian gas per day, although the actual amount will depend on many factors and may only become clear in coming months. The UAE is eager to obtain additional natural gas supplies to support its rapid economic growth.

In the last few years, international financial sanctions imposed by the US and Europe over Tehran’s disputed nuclear programme have restricted trade between the UAE and Iran. Dana did not say whether the sanctions might complicate efforts to implement the gas supply contract.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2014 Menas Associates

Egypt: American energy worker killed in apparent carjacking near Cairo

An American employee of Texas-based energy company Apache Corp has been killed in an apparent carjacking in the western Egyptian desert, officials said on 10 August.

"The victim was a long-time employee who works with production operations and we are deeply saddened by his death," Apache spokesman Bill Mintz said. "Apache is working with authorities and a full investigation is underway."

Mintz stated that the attack occurred on Wednesday 6 August as the employee was driving in the desert between Qarun and Karama, southwest of Cairo, although the exact details of the attack are still uncertain.

It has been confirmed that the Apache employee died as the result of gunshot wounds. Egyptian security officials have, however, stated that the worker's body was found in a car on a road outside Cairo with another foreigner who had been working with the Egyptian government-owned company Qarun Petroleum. 

Mintz said he was receiving conflicting information about whether the Apache worker was alone or accompanied by someone else but confirmed that the Apache employee was the only victim who had been shot. It does, however, remain unclear as to whether or not this means the American was the only casualty.

Egyptian security officials, who asked for anonymity as they were not authorized to speak to the media, said that investigations were ongoing to determine who was responsible for the 6 August attack. 

The victim's name was not immediately released as family members were still being notified and the nationality of the alleged survivor has not been disclosed while investigations continue. 

For expert analysis of Egypt's security, politics, economy, and business environment see Egypt Politics & Security or contact info@menas.co.uk

© 2014 Menas Associates

Iraq: IOCs in Kurdistan region see shares retreat as non-essential staff evacuated

The apparent stability and growing prosperity of Iraq’s more liberal and pro-business Kurdistan region has been undermined in recent weeks as Islamic State insurgents make significant advances into the Kurdish-controlled region. IOCs that were previously unaffected by the growing violence elsewhere in Iraq, are now seeing their share prices retreat in a manner reflecting those of the Kurdish forces.

Genel Energy, one of the IOC’s reaping the benefit of the export pipeline to Ceyhan in Turkey, has seen its shares shed 17% since the start of the month. London-listed Gulf Keystone Petroleum put out a statement on 7 August confirming that its production and trucking operations at its giant Shaikan field “remain safe and secure”, but this did little to prevent its shares falling by more than 11%. Norway’s DNO - , which has exploration, development and production interests in Kurdistan - was also hit, with its shares sliding 9.5%.

Following the lead of Chevron, ExxonMobil, Afren and Taqa, these companies, as well as Hess and its partner Petroceltic, have suspended operations in the  Kurdistan region and started to evacuate non-essential staff amid spreading violence in the region.

Last week Kurdish forces lost several  towns to Islamic State displacing 150,000 people largely from the Yazidi religious minority to according to a UN estimate. 

Considered to be ‘devil worshippers’ by the Islamic State, the Yazidis pray five times a day to the Malek Taus, the Peacock Angel also known as Shaytoun in the Kurdish language. Unfortunately, Shaytoun also means ‘devil’ in Arabic. The Islamic State has been accused of issuing an ultimatum to the Yazidi community to convert to Islam or face death, and reports from refugees state that these threats have been enacted through beheadings. 

The Kurdistan Regional Government has sent its Peshmerga forces to tackle the threat and the US has started air strikes, however, resulting in the recapture of two towns from Sunni militants on 10 August, one of the first victories for a military force that until now has been in retreat.

In a statement released 11 August, Petroceltic said “In conjunction with Hess Middle East New Ventures, our partner and the operator of our exploration activities in the Kurdistan Region of Iraq, we have been closely monitoring recent events in the region. While these developments have not directly impacted our exploration activities to date, in line with other operators in the region, it has been decided, as a precautionary measure, to temporarily secure and suspend operations (including the drilling of Shireen-1 exploration well in the Dinarta licence) and to evacuate non-essential personnel”.

Hess operates Iraqi Kurdistan's Dinarta and Shakrok fields, in which Petroceltic and the Kurdistan Regional Government have stakes of 16% and 20% respectively. The partners started drilling their first well, Shireen-1, on the Dinarta block in June and had expected exploration work to last five months. However, they decided to plug and abandon the Shakrok-1 well after disappointing exploration results.

Oryx Petroleum announced on 8 August that it had implemented a number of precautionary measures to protect its employees from the security developments in the region.  In the western portion of the Hawler license area the drilling operations at the Ain Al Safra and Banan sites have been temporarily suspended, both sites secured, and non-essential personnel relocated to Erbil given the proximity of such locations to recently reported hostilities in northern Iraq. 

In the central portion of the Hawler license area, drilling operations and facilities construction at the Demir Dagh field remain secure and operational but continue at reduced levels primarily due to the departure of certain third-party service company personnel from the site. Production from the Demir Dagh field has also been shut-in. 

The situation is moving fast in Iraq and with no sign of any easy solution to the advance of the Islamic State, which now controls parts of Syria and Iraq, including key oilfields that are funding the militants, investors should stay wary.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2014 Menas Associates

Chad to take CNPC to Paris arbitration court

Chad is reportedly making preparations to take China National Petroleum Corporation (CNPC) to an arbitration court in Paris after compensation talks stalled. Chad has levied a claim for US$1.2 billion in compensation from the Chinese state-owned company for breaking the country’s environmental rules, according to reports.

Chad's oil minister, Djerassem Le Bemadjiel, told a news conference on Saturday that the move was "to avoid further environmental degradation, not to make place for other companies".

The dispute began in July 2013 after Chad said it discovered large quantities of crude had been dumped into pits dug in the Koudalwa region, where CNPC has held licenses to several oil blocks since 2009.

The CNPC was forced to suspend operations in Chad this May after refusing to pay the US$1.2 billion fine for "unacceptable practices" which led to "noxious spills" around drilling sites.

Secretary-general of the Chadian government, Abdoulaye Sabre Fadoul, at a news conference last week, stated that "Amicable negotiations are no longer possible. All efforts have been in vain… That is why we have decided to take a complaint to the arbitration tribunal in Paris, as agreed under the terms of our contract with CNPC."

As well as taking the case to the International Arbitration Chamber of Paris, the minister said the government had lodged a complaint against CNPC at a court in N'Djamena for ‘environmental destruction and endangering lives’ and had cancelled five exploration licences held by CNPC.

A spokesman for the Chinese oil company could not immediately be reached for comment.

Chad, which began exploiting its oil deposits in 2003, has a history of difficult relations with Chinese companies operating on its soil.  In March, Chadians working for Great Wall Drilling Corporation and China National Logging Corporation went on strike to denounce their working conditions and demand salary increases.

For more news and expert analysis about the Sahara region, please see Sahara Focus.

© 2014 Menas Associates

South-East Asia: Washington hopes ASEAN Regional Forum can lower tensions in the South China Sea

In a meeting with Southeast Asian nations this weekend, U.S. Secretary of State John Kerry will press for a voluntary freeze on actions aggravating territorial disputes in the South China Sea, in spite of Beijing's rejection of the idea.

A priority for Kerry at the ASEAN Regional Forum (ARF) would be to lower tensions in the South China Sea while accelerating efforts by ASEAN and China to agree on a code of conduct. China and four members of the ten-nation Association of Southeast Asian Nations (ASEAN) have rival claims to the South China Sea, through which about US$5 trillion of maritime trade passes annually.

Speaking to Reuters on 4 August, Daniel Russel, the State Department's senior diplomat for the East Asia region, said "The regional economy is too important and too fragile for any country or any claimant to use the threat of military force or paramilitary force in retaliation, for intimidation, or as a coercive effort."

In a news briefing, he continued there was room for rival claimants "to take some voluntary steps, and to identify actions they find troubling if not provocative on the part of other claimants, and to offer, if everyone will agree, to renounce those kinds of actions." Such steps could include abiding by an existing agreement not to seize unoccupied land features, or more significantly, a moratorium in land reclamation efforts.

China, which will also participate in the ARF meeting, rejected the idea of a freeze, however, saying it could build what it wanted on its South China Sea islands. China claims 90% of the sea, which is believed to contain oil and gas deposits and has rich fishery resources. 

Yi Xianliang, deputy head of the Chinese Foreign Ministry's Boundary and Ocean Affairs Departments, said that if the United States had such a proposal, he had not seen it and that in any case the South China Sea was an issue for countries directly involved.

The Philippines has also stated its intentions to propose a freeze at the ARF meeting, as well as the implementation of a code of conduct and arbitration to settle disputes. In July, Manila called for a meeting of the four ASEAN claimants - itself, Brunei, Malaysia and Vietnam - ahead of August’s ARF to hammer out a common stand in dealings with China. 

China has been increasingly assertive in pressing its territorial claims and Washington fears misunderstandings could inadvertently lead to open conflict. China's recent withdrawal of an oil rig from waters also contested by Vietnam, reported in Menas Borders on 16/07/2014, had removed a serious irritant but China’s neighbours have been left with serious questions about China's long-term strategy.

For more information about China’s claim to the South China Sea please see our Border Focus: South China Sea briefing.

Kenya: President Kenyatta to impose capital-gains and windfall tax legislation within months

Kenyan President, Uhuru Kenyatta, stated in a 2 August interview that Kenya will impose capital-gains and windfall taxes on oil, gas and mining companies within months to ensure the East African nation maximizes benefits from its mineral resources.

Enacting the laws this year will be a positive signal to investors that Kenya is keen on creating necessary conditions for the industry. “This is something that we are very clear about,” Kenyatta said from Nairobi’s State House, “We want to ensure that we as a country also are able to benefit from both the windfall and capital-gains tax.” 

Recently oil reserves have been found in northern Kenya, while gas exploration continues and the nation’s potential for gold production is being studied. 

Kenya hopes the new legislation will prevent similar situations to Tullow’s experience in Uganda, where the company is appealing against the state revenue authority’s demand that it pay capital-gains tax of about US$473 million following its sale of assets in Uganda. 

For an in-depth analysis of this issue and how it will affect the exploration companies operating in the country please see our upcoming issue of East Africa Politics & Security.

© 2014 Menas Associates