East African upstream investment both offshore and onshore will hit US $7 billion a year by 2018, according to analyst Wood Mackenzie.

Martin Kelly, head of sub-Saharan Africa upstream research for WoodMac, told delegates at the East Africa Oil and Gas Conference in London that with more than 130 Tcf of gas and around 2 Bbbl of oil discovered to date, East Africa has the same again in yet to find potential still to be found.

Kelly said that upstream capital investment in East Africa has averaged about $1 billion a year since 2010, excluding exploration investment. “As these discoveries are developed, we expect to see levels of investment grow at an average of around 60% per year until 2018. We see the highest levels of investment in Tanzania, Mozambique and Uganda. The surge in investment will also cause East Africa’s oil and gas production to triple from around 500,000 boe/d to 1.5 MMboe/d,” he stated.

Kelly also highlighted 2012 as an “exceptional year” with more than 50 wells completed in the region, resulting in East Africa accounting for nearly half of the total volumes discovered globally through conventional exploration.

He added that, although the outlook for East Africa was overall a positive one, for many of the industry’s major players the lure of yet-to-find volumes may not be enough. “In order to realise this level of investment, it is key that the right incentives are in place as companies will be looking for attractive rates of return and a stable fiscal environment. Striking a balance between investors and governments will not be straightforward, but East Africa appears to be off to good start,” he said.

“There has been great success in the region so far and there is still plenty to go after. Of course there are a number of challenges to overcome in terms of available infrastructure, export routes and fiscal stability, in order for the sector to realise its full potential. However, the economics of the proposed projects are very positive – delivering good returns to investors in what is set to be an exciting time for the region’s upstream sector,” he concluded.