Mubadala spends $23m for oil and gas exploration site in Tanzania
Mubadala Development has bought into an oil exploration block in Tanzania, a nation that has yet to find any crude.
However, analysts say oil may not be the reason behind the US$23 million (Dh84.48m) investment by Mubadala Oil & Gas, the company's energy unit, into a one-fifth stake of the block off the East African coast.
"Although oil itself hasn't been discovered in Tanzania, there are large reserves of natural gas, and that's what is driving the interest in the country," said Patrick Mair, the analyst for sub-Saharan Africa at the risk assessment group Control Risks.
"East Africa has really taken off over the last few years."
Dominion Petroleum, the British oil exploration company selling the share, announced the deal this week.
The UAE is the world's fourth-biggest oil exporter, but it has a growing need for natural gas as its need for electricity grows, particularly as it enters energy-intensive industries such as metal smelting in its drive to diversify the economy away from oil.
Mubadala Development is a strategic investment company owned by the Abu Dhabi Government.
Mubadala Oil & Gas could invest in other exploration prospects in what it called a "high-impact exploration province" in the future, Maurizio La Noce, the chief executive, said.
Under the agreement, which requires the approval of the Tanzanian government, Mubadala will pay $20m for its stake and up to $3m of the costs of a seismic programme scheduled to begin this year.
In the past year, smaller exploration companies have made a series of "significant" gas discoveries and there are signs Tanzania is weighing plans to build a plant for liquefied natural gas, which can be shipped by tanker, said Marné Beukes, an analyst at IHS Global Insight in London.
Last month, China agreed to loan Tanzania $1 billion to build a gas pipeline.
Larger players are now entering the race, with Royal Dutch Shell, based in the Netherlands, this week buying a 50 per cent stake in two blocks neighbouring the Dominion block.
The discovery of oil in Uganda recently is also helping to drive interest in East Africa.
But the offshore industry has come under threat from Somali pirates, who are moving farther down the African coast and up the oil production chain as security increases for crude tankers.
This week Tanzania arrested seven Somalis suspected of attacking an exploration vessel operated by Petrobras, the Brazilian producer.
"As the oil and gas infrastructure develops in Tanzania, we can expect more attacks to be taking place," said Mr Mair.
Updated: October 7, 2011 04:00 AM