Tuesday, January 10, 2012

Ethiopia: Local company signs petroleum exploration deal [50178796] | African news, analysis and opinion – The Africa

Posted on Tuesday, 10 January 2012 00:34

Ethiopia: Local company signs petroleum exploration deal

By The Africa Report

South West Energy (SWE) on Monday signed a Petroleum Development and Production Sharing Agreement (PSA) to explore oil and gas reserves in the Gambella basin, making it the first Ethiopian company to sign a petroleum exploration accord with the government.

Petroleum and gas exploration deals have so far been the preserve of foreign companies, with the Chinese making a mark in the sector.

The agreement, signed by Sinkenesh Ejigu - Ethiopian Minister of Mines and Tewodros Ashenafi, CEO of South West, will see the company developing oil and gas reserves.

Ethiopia's council of ministers in November approved the project, paving the way for the agreement between the two sides.

SWE, which was established in 2004 and already owns oil exploration areas in the Ogaden Basin and around Jimma town, says it will invest US$7.5 million for the first phase of development.

In 2005 SWE became the first Ethiopian company to win oil and gas exploration rights in Degehabur Zone, in the Somali Regional State in the Ogaden Basin covering an area of 29,000 square kilometres.

The Gambella block was initially awarded to Petronas, a Malaysian exploration company, which has been involved in oil exploration in the neighbouring Sudan since 1996, in 2003. Petronas committed approximately US$100 million to explore the Gambella Basin.

But in 2008, Petronas relinquished the block after aeromagnetic and seismic surveys, which led them to drill two wildcat wells (3500m) in Jigaw and Jacaranda localities close to the Sudanese border, which were deemed commercially unviable.

Three years ago, a rebel group in the Ogaden region of Ethiopia, killed 9 Chinese and 65 Ethiopian oil workers.

The rebel group, Ogaden National Liberation Front (ONLF), which claims to be fighting for the independence of the Ogaden region of Ethiopia, is opposed to any petroleum exploration in the Somali region of Ethiopia.

However, companies involved in oil exploration in the area are currently undertaking their operations under tight security from the government.

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