East African bourses are wooing oil and gas companies to list in an effort to increase the size of the regional capital market and offer local investors opportunity to invest in the industry.

Tanzania has already drafted a policy that is before the Cabinet, which requires oil and gas companies operating in the country to list on the local bourse.

Kenya’s Capital Markets Authority announced last week that two state-owned companies dealing with the oil business — the National Oil Corporation (NOCK) and the Kenya Pipeline Company — are planning to list on the Nairobi Securities Exchange.

NOCK has an exploration licence for Block 14T.  In Tanzania, Swala Oil and Gas (Tanzania) Ltd is preparing for listing to achieve more than 50 per cent local shareholding through listing on the growth and enterprise market segment (Gems).

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In Uganda, London-listed Tullow Oil’s plan to cross-list has been on agenda for two years now.

The listing of oil and gas companies is seen as a short route to achieving local participation in the oil and gas industry whose discoveries have raised the global profile of East Africa, becoming the next oil and gas frontier after the Middle East.

Kenya’s CMA chairman Kung’u Gatabaki said privatising NOCK, through listing “will enable Kenyans to participate in the oil sector through ownership in the market and distribution infrastructure.”

Oil and gas exploration activities are dominated by foreign owned companies, partly because of the high capital outlay required to finance exploration.

As a result, local participation in the oil and gas sector is being threatened, with opportunities being limited to supply of services.

When production starts in the next three to five years with Kenya and Uganda producing an estimated 200,000 barrels a day, oil revenues could contribute to approximately 16 per cent of each country’s gross domestic product, according to Tony Wainaina, managing partner at Fanisi Capital, a private equity company.

He said while local businesses can provide accommodation, catering, water and sanitation, drilling tools and fluids, logistics and heavy lifting, pipeline construction and other support services, they have no choice but to comply with the high qualification standards that the upstream companies are demanding from service providers.

Listing is also expected to expand the size of capital markets in the region, offering companies a wider and cheaper avenue to fundraise as locals.

Part of the plan to achieve this aims has been the introduction of growth enterprise market segments (Gems), which make it easier for small and medium scale enterprises to list.

The segments have lower listing fees and less stringent regulations to listing compared with listing on the maim market segment.

The Dar es Salaam Stock Exchange, the Nairobi Securities Exchange and the Uganda Securities Exchange have all introduced Gems with some early listings already completed.

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The Rwanda Stock Exchange announced in August that small and medium-sized businesses that want to list at Kigali’s bourse will not be subjected to any minimum capital requirement, effectively setting the foundation for introduction of the Gems.

Although the growth market segments were developed to facilitate SMEs listing across all sectors, they are coming in handy for oil and gas companies.

For instance, Swala Oil and Gas (Tanzania) Ltd is planning to list at the DSE’s Enterprise Growth Market (EGM) in a bid to raise $2 million.

According to the company’s chief executive officer, David Ridge, DSE’s EGM has come in handy as most natural resources companies could not list locally because of the main board’s stringent requirements.

“This company is 35 per cent owned by Tanzanians and we plan to reach the 50 per cent mark through listing. When we achieve that, Swala Oil will become the first oil local company,” said exploration director Neil Taylor.

The East African Capital Markets Association is spearheading harmonisation of capital markets legal and regulation framework in the region. The deadline for stakeholders to submit suggestions closed on October 18.

READ: The changing face of EAC capital markets as integration gathers speed