Major oil exploration deal

Ethiopia could start exporting oil within four years after signing a multi-million-dollar exploration deal, Minister of Mines Ambassador Mohamoud Dirir told IRIN on Monday. Ambassador Dirir said the newly signed agreement with Malaysian oil giant Petronas would provide a major financial boost for the country. “This would be a breakthrough for the Ethiopian economy,” the minister told IRIN. “This will also bring about a positive change in the image of Ethiopia.” Exploration is expected to start in a matter of months in Gambella, in the remote western part of the country. Production is expected to start within four years. Under the deal, Petronas has exclusive rights to “explore and develop” some 15,000 square kilometres in the region, which borders Sudan – a major African oil producer. “This is a region closely related to the Sudan oil fields,” added the minister. “The potential is obviously there.” The oil company, which currently ranks among the Fortune Global 500 companies, has to invest US$5 million in developing the infrastructure and employing local staff. A further US$1 million will be spent on boosting the skills of the ministry and another US$1 million on improving the facilities of the local community in areas like health. Ethiopia will also receive royalties from any oil that is produced in the region. According to Ambassador Dirir, this could mean that if the company is producing 30,000 barrels of oil a day then Ethiopia would receive some 5 percent in royalties – approximately US$1.50 a barrel. If production increases, so do the royalties, under the 25-year licence. Each exploration licence is renewable every four years, he said. The minister said that Petronas had a proven track record and currently operated in 15 African countries. “By bringing Petronas into Ethiopia it will attract more and more companies,” added Ambassador Dirir. “As a government, Ethiopia is seriously committed to this project.” This is the first time Ethiopia – whose per capita income is around US$100 a year – has granted an exploration licence. The company is also looking at exploration of natural gas in the southeastern part of Ethiopia – in Somali Regional State. Experts from Petronas are to carry out geological studies in the 350,000-square-kilometre Ogaden basin which is believed to have vast gas deposits, Ambassador Dirir said. Ambassador Dirir also dismissed claims that ethnic conflict in both regions would disrupt any kind of exploration work. He said that clashes in Gambella had been resolved and that rebel groups in Somali Region posed no threat.