w w w . S o m a l i T a l k . c o m

  • -Ethiopia welcomes Russian oil, gas companies
  • -Ethiopia eyes new oil exploration areas
  • -Ethiopia: Petronas Signs Gas Development Agreement
  • -Ethiopia to Tender Blocks in Ogaden Basin
  • -Ministry to Revoke SIL's Petroleum Development License (January 14, 2006)
  • - SIL to invest 1.5 billion USD in the mining industry (Dec 30, 2003)
  • - Calub to be given to private compnaies on concession (Feb 19, 2003)
  • - Russians sign for 50 percent shares in Calub (February, 2002)
  • - World Bank  Leaves Off Extending Loans to Calub  (August 19 - 26, 2001 )
  • - American Company Contemplates Calub Gas Exploitation (August 2001)
  • - Africa "Key Source" for Energy Supply and Development Senior U.S. energy official  testifies before Congress March 16 2000
  • - Sicor plans 375-mi Ethiopian pipeline - January 2000
  • - Small  firm signs $1.4 billion deal to develop gas project in Ethiopia: December 1999
  • - Ethiopia  Signs $1.4 Billion Deal With U.S. Firm Sicor: Reuters; December 9, 1999
  • - A  Second Wind For Calub Gas February 1999
  • - Ethiopia withdraws bid for sale of gas company February 02, 1999
  • - Inventory of fossil fuel extraction projects financed by World Bank Group, mid-1992 to 1997

Ethiopia welcomes Russian oil, gas companies

February 13, 2008 (MOSCOW) -– Ethiopian Trade and Industry Minister Girma Birru said Wednesday that the Ethiopian government welcomed Russian oil and gas companies’ plans to develop deposits in Ethiopia.

The visiting minister was speaking following a meeting of a Russian-Ethiopian government commission.

Birru said that, in particular, Russian oil major Lukoil was seeking to develop oil and gas fields in the country.

In the eighties the Soviet Petroleum Exploration Expedition (SPEE) drilled nine deep gaz wells from 1982 to 1993 in the region of Calub.

The Calub gas reserves are estimated at 2.7 trillion cubic feet (TCF) while the Hilala gas reserves are estimated at 1.3 TCF. Ethiopia also plans to lay two pipelines - 80 km from Hilala to Calub and 700 km from Calub to Dire Dawa.

Different countries, China, India, Malaysia and the British White Nile company showed interest in Ethiopia’s oil exploration however the political instability particularly in Ogaden which is believed to contain huge amounts of oil reserves hinder the economic exploitation of oil resources.

Also, the Gambella basin is one of the five sedimentary basins found in Ethiopia, which are expected to be oil prospective.



Ethiopia eyes new oil exploration areas

 The Reporter (Addis Ababa)
Saturday, 19 January 2008

ImageThough there are five sedimentary basins believed to be prospective for oil discovery in Ethiopia, much of the oil exploration activities hitherto have been carried out in the Ogaden basin, eastern part of the country. The Ogaden, Gambella, Omo Valley, Abay Gorge and Mekelle are the five sedimentary basins found in Ethiopia.

After the huge amount of oil discoveries in the 1930s in some Middle Eastern countries, international petroleum companies became interested in the Ogaden basin, whose age is equivalent to that of the basins in Saudi Arabia and Yemen. Studies indicate that the geological formation of the Ogaden basin and its maturity is similar to some of the basins in the Middle East.

The history of oil exploration in the Ogaden basin dates back to the early 1940s. Several companies undertook exploration activities in the region during the imperial regime. Sinclair (American), Elwerath (German), Voyager Group (Canadian), and White Stone (American) are some of the international companies which had undertaken geological surveys in the region between 1944 to 1975. The American  oil company Tenneco, which conducted an extensive seismic survey and drilled several exploration wells, discovered a natural gas reserve in Calub and Hilala localities in 1972. Some eight companies conducted different geological studies in the Ogaden basin during the imperial regime. Later on, during the Derg regime, the Russian company Soviet Petroleum Exploration Expedition (SPEE) conducted seismic surveys that covered thousands of squares of kilometers. The company was operational in the Ogaden from 1979 to 1992.

SPEE collected numerous geological data and drilled dozens of exploration wells. It also drilled exploration and gas production wells in the Calub and Hilala gas fields. The company also confirmed the gas reserves discovered by Tenneco. The gas reserve in the two localities is estimated at 116 billion cu.meters.

In the early 1990s, two American companies-Maxus and Hunt Oil-conducted petroleum studies in the Ogaden basin. Both companies conducted seismic serveys and Hunt Oil drilled one well which turned out to be dry. However, oil and gas inflows were noted in several wells drilled at different times in El Kuran, Hilala, Sillabo and Magan. A small amount of non-commercial crude oil reserve was also discovered in Hilala. For one or other reason all the companies focused on Ogaden. So far, 48 wells have been drilled in Ethiopia and 46 of are in the Ogaden while two are found in the Gambella basin.

Until recently, there was no company which was interested in exploring the other sedimentary basins. The Malayisian oil and gas giant, Petronas, was the first company to engage in exploration project in the Gambella basin . In June 2003, Petronas and the Ethiopian Ministry of Mines and Energy(MME) signed a petroleum exploration and production sharing agreement (PSA), which entitles the company to prospect for and develop petroleum resources in the Gambella block on a 16,000 of land. Since 2004, Petronas has been conducting seismic surveys and has drilled two exploration wells in Jikaw and Jacaranda localities. Both wells were dry (no gas and oil show).

 The Gambella and Omo Valley are the extensions of the oil productive Muglad and Melut basins of neighboring Sudan. Jikaw is only 175 kms east of the Sudan border. “You can not ascertain if there was oil in the region by drilling only two exploration wells,” says Abiy Hunegnaw, petroleum operations department head with MME. Petronas, which is also engaged in oil exploration and production activities in the Sudan, anticipates to drill more wells in the Gambella basin. In August 2005, it acquired three exploration blocks in the Ogaden. It also agreed to develop the gas reserve in the Calub and Hilala localities. The company has signed a petroleum development agreement which enables it to extract the gas reserve. Pexco, another Malaysian company, South West Energy, a company registered in Hong Kong, and Lundin Petroleum, a Swedish company, have also concession rights in the Ogaden basin. In 2005, Afar Exploartions, an American company signed an exploration and PSA with the MME to prospect for oil in the Afar regional State. Afar exploration was the second company to be granted a concession outside right the Ogaden basin.

Currently, the company is conducting airborne magnetic and gravity surveys in the Afar region. A local company called K and S has also been conducting a joint geological study with MME in the North Wollo Zone of the Amhara Regional State. Recently, a US-based company called Inter Global has requested MME to be granted an oil exploration license which entitles it to prospect for oil in the Afar, Tigray and east Amhara region.

The escalating price of oil has boosted oil exploration industry. A few years ago, there wasn’t a single company engaged in an exploration project. MME's efforts to attract potential investors have borne fruit in bringing in some five foreign companies. The companies are now significantly contributing to the FDI flow to the country.

South West Energy has also requestyed to sign a joint study agreement (JSA) with MME with a view to conduct a geological study in a locality near Jimma town, in the Oromia Reginal State.

As more companies come to Ethiopia, the MME wants to assign them to different regions which are believed to be prospective for oil. There are 21 exploration blocks in the Ogaden basin, 17 of which have already been occupied. Only four are available for investors. However, the remaining blocks are less prospective compared to the other blocks in the region. The ministry wants petroleum companies to see the potentials of other sedimentary basins in Ethiopia instead of concentrating only on Ogaden.
The British oil and gas company,White Nile Limited,  last Tuesday signed a petroleum exploration and production sharing agreement with MME which grants it the right to prospect for and develop petroleum resources in the Omo Valley found in the Southern Nations, Nationalities and Peoples, National Regional State.

White Nile is an oil and gas exploration company listed in the Lodon Stock Exchange and operates mainly in Southern Sudan and the surrounding region. Nile Petroleum Corporation and National  Oil Company of Southern Sudan have a major equity stake in the company.

The Omo Valley is part of the East Africa Rift. It recently became attractive for oil exploration activity because of the oil discovery in Uganda and Southern  Sudan. White Nile and MME have signed a two year Joint Study Agreement (JSA). In the past two years, White Nile and the Petroleum Department of MME jointly evaluated the petroleum potential of the area and its relationship with the Southern Sudan basins as well as the northern Kenya rift basins.

MME has revealed that White Nile acquired 29,465 of land in the Omo Valley, adding the company will pay one million signature bonus to the government of Ethiopia. The ministry said the company will pay 200,000 dollars per year for community development and allocate a fund to train Ethiopian personnel in the field of petroleum exploration and development programmes.

Mr Philippe Edmonds, Chairman and CEO of White Nile, said the company had noted encouraging results during the JSA. He indicated that the company will start conducting seismic surveys at the end of this year. Edmond said the company has allocated 15 million dollars for its project. Experts of White Nile told The Reporter that the Omo valley sedimentary basin was thick enough for the discovery of oil. The Omo Valley and Gambella basins are extensions of the oil productive Muglad and Melut  basin in the Sudan.

“As the East Africa basins are becoming attractive, I hope your exploration work will be successful,” Alemayehu Tegenu, Minister of Mines and Energy said to Mr. Edmonds. “The agreement we signed with White Nile is the first in this Ethiopian millennium. In the new millennium, we have to strive more than before to satisfy our society's needs and to minimize the foreign currency used for petroleum import,” Alemayehu also said.

So far the government of Ethiopia issued 12 petroleum exploration and one development licenses.  

By Kaleyesus Bekele

Ethiopia: Petronas Pays 80 Million Dollars for Gasfields

The Reporter (Addis Ababa)
22 September 2007

By Kaleyesus Bekele
The Malaysian oil and gas company Petronas last month paid the Ethiopian government 80 million dollars for the Calub and Hilala natural gas fields in the Ogaden basin, south-east Ethiopia.Pertonas won the international tender put up by the Ethiopian Ministry of Mines and Energy (MME) to privatize the Calub and Hilala gas fields found in the Somali Regional State. The ministry put up the tender in April 2006 inviting petroleum companies interested in developing the two gas fields discovered in 1973. In August 2006, MME announced that Petronas was the winner.

After a long negotiation on the details of the gas development project last June MME and Petronas signed petroleum development agreement and production sharing agreement (PSA), which enables the latter to extract and market the gas reserves in Calub and Hilala localities. Recently, Petronas paid the 80 million dollars pre-development cost Ethiopia invested on the gas fields.

A senior government official told The Reporter that the signing of the gas development project and the predevelopment cost payment were big achievements for MME. “Eighty million dollars is a big sum. The ministry has never received this amount of payment,” the official said.

The natural gas reserve in Calub and Hilala is estimated at four trillion cubic feet (4TCF). The gas fields that covers 285 sq m are found 1, 200 km south-east of Addis Ababa. The gas fields were first discovered by an American company called Tenneco during the reign of Emperor Haile-selassie. Tenneco, which drilled three wells in Calub and one in Hilala, was forced to withdraw because of the 1974 revolution that toppled Emperor Haile-selassie.

The Soviet Petroleum Exploration Expedition (SPEE), which drilled additional wells in Calub and Hilala in the 1980s and early 90s, confirmed the gas reserves. SPEE drilled seven wells in Calub and three in Hilala, 80 km from Calub. In 1998 the Chinese petroleum company, Zhoungyan Petroleum Exploration Bureau (ZPEB), contracted by the Ethiopian government, made eight of the wells in Calub ready for production. ZPEB was paid 5.6 million dollars for the well completion work.

Several companies which have shown interest to develop the gas fields held negotiations with the Ethiopian government. Secor, an American company, Methanol Joint Stock and Stroy Trans Gas, Russian companies were some of the companies which held negotiations with the government. Although these companies signed memorandums of understanding (MOU) on different occasions none of them were able to sign final agreement for various reasons.

Another company, which was interested in developing the gas fields, was SI Tech International (SIL). The Jordanian Company, SIL, signed petroleum development agreement and PSA in 2003. However, the company was unable to commence work on the project until 2006. Alemayehu Tegenu, Minister of MME, revoked the petroleum development license given to SIL and decided to tender the project.

Petronas has been projecting for oil in the Gambella basin, western part of Ethiopia and in different localities in the Ogaden basin. The company took over the Gambella block covering 16, 000 sq km of land in 2003. In 2005, the company secured three blocks in the Ogaden basin. The exploration blocks are found in Wel-Wel, Warder, Fer-Fer and Genale localities in the Ogaden basin. The total exploration area is 93,000 sq km. The company paid over five million dollars in signature bonus.

The company offered training programs for over 20 professionals working in the MME and it is also engaged in community development projects in the Gambella region. As part of its assistance to the ministry, the company upgraded ageing petroleum data collected from the Ogaden basin by different Companies.

Petronas proposed to build a gas processing plant and to construct a gas pipeline that stretches from the Calub and Hilala gasfields all the way to the Pot of Djibouti. In addition to the gasfields, MME granted Petronas two exploration blocks called B l1 and 15. B 11 and 15, which are very close to the gasfields believed to be the most promising areas for oil discoveries. Oil were noted in Calub and Hilala as wel as in bll and 15.

Petronas plans to drill exploration wells in these areas. The company proposed to invest up to 1.9 billion dollars for the petroleum exploration and development project. The construction of the gaspipeline and the gas processing plant could take over three years.

If the gas development project comes to fruition, Ethiopia for the first time, would be a hydrocarbon producing country. Petronas will pay a 35 percent income tax payment and three percent royalty fee to the Ethiopian government. The government will also have a 5 percent share from the annual gas production.

Petronas, wholly owned by the Malaysian government, operates in 35 countries in Asia and Africa. It is engaged in oil exploration and production project in African countries like Sudan, Chad and Angola. Petronas, which was established in 1974, is one of the top ten leading oil companies in the global oil industry.

Source: 2007 The Reporter.

7 August 2007: Malaysia Signs Gas Development Agreement with Ethiopia

 The Malaysian oil company Petronas and Ethiopia’s Ministry of Mines and Energy (MME) have signed a gas development agreement that would enable the company to develop the natural gas reserve in the Calub and Hilala areas in east Ethiopia’s Somali State, The Reporter said Saturday. The English weekly newspaper reported that the agreement was signed by Petronas President Mohamed Hassan Marican and Alemayehu Tegenu, minister of MME, in Malaysia’s capital Kuala Lumpur. Petronas has won the2006 international tender by the MME to award the Calub and Hilala gas fields in the Ogaden basin.

Ethiopia: Petronas Signs Gas Development Agreement

The Reporter (Addis Ababa)

4 August 2007
Posted to the web 5 August 2007

Kaleyesus Bekele
Addis Ababa

The Malaysian oil and gas company, Petronas, and the Ethiopian Ministry of Mines and Energy (MME) last month signed a petroleum development agreement and production sharing agreement (PSA) that would enable the company to develop the natural gas reserve in the Calub and Hilala localities in the Somali Regional State.

The agreement was signed by Alemayehu Tegenu, minister of MME and Dato Mohammed Hassan Merrican, president of Petronas in Kuala Lumpur, Malaysia. Petronas has won the international tender put up by the MME to award the Calub and Hilala gas field in the Ogaden basin a year ago. In July 2006, the MME sent an awarding letter to Petronas and since then the two parties have been negotiating on the details of the gas fields development project in Addis Ababa and Kua Lalampur. Petronas has also secured two exploration blocks (B11&15) in the Ogaden basin. The blocks are found in the vicinity of the Calub and Hilala gas fields.

Petronas plans to build a gas processing plant and to construct a gas pipeline that stretches from the gas fields to a seaport. In addition to extracting the gas reserve, the company plans to conduct seismic serveys and to drill exploration wells in the gas fields as well as in block 11 and 15.

The Calub and Hilala natural gas fields are located 1,200 km south-east of Addis Ababa. The total area of the gasfields is

The gas reserve, estimated at 113 billion cu. m. (4TCF), was first discovered by an American company, Tenneco, in 1972. Later on the reserve gas was confirmed by the Soviet Petroleum Exploration Expedition (SPEE). Ten wells were drilled in Calub and four in Hilala. Non commercial oil reserve was discovered in Hilala by Tenneco. Block 11 and 15 where oil and gas shows were discovered are considered to be one of the most promising exploration areas in the Ogaden basin. In August 2005 Petronas acquired exploration areas in the Genale, Warder, Fer Fer and Wel Wel localities in the Ogaden basin. The company has also been prospecting for oil in the Gambella basin, south-west Ethiopia.

Petronas, one of the top ten leading international oil companies in the world, was established in 1974. Wholly owned by the Malaysian government, the company has 110 subsidiary companies. Petronas operates in 14 African and 21 Asian countries. The company is active in the Sudan, Chad, Cameroon, Angola and Yemen.


Ethiopia to Tender Blocks in Ogaden Basin

Alexander's Gas & Oil Connections
volume 12, issue #5 - Wednesday, March 14, 2007

The Ministry of Mines and Energy (MME) is to tender two oil exploration blocks in the Ogaden basin, in eastern Ethiopia. The ministry will put up an international tender that will be inviting petroleum companies interested in engaging in oil exploration activity in the concession areas called Block 7 and 8. The blocks are found in the Ogaden basin in the Somali Regional State. There are about twenty blocks in the Ogaden basin and 16 of them were given to different companies.

Alemayehu Tegenu, Minister of MME, told that three companies had asked the ministry to be given block seven and eight. Alemayehu said since different companies had shown interest to acquire the blocks the ministry opted to float a tender. Alemayehu added that the ministry was preparing tender document to be soon put on an international tender.

Petronas, Pexco, Lundin and South West have concession areas in the Ogaden basin. The basin covers 350,000 sq km. of land. The Malaysian oil and gas company, Petronas, acquiredfour blocks in Genale, Kelafo, Warder and Ferfer localities covering 93,000 sq km of land. The agreement was signed in August 2005. Currently Petronas is undertaking a seismic survey in Genale locality.

Petronas has won the Calub and Hilala gasfield tender put up by the MME last April. The gasfields are located some 1,200 km east of Addis Ababa. Officials of Petronas and the Ministry have been negotiating on the gasfield development project. The two parties are expected to sign petroleum development and production sharing agreements in March. The agreements would enable Petronas to extract the natural gas reserves in Calub and Hilala localities found in the Ogaden basin. Petronas has also asked to be given Block 11 and 15 near the Calub and Hilala gasfields. Officials of Petronas and MME have been negotiating on the two blocks. "We have concluded talks on the acquisition of Block 11 and 15. We could give the blocks to Petronas together with Calub and Hilala," Alemayehu said.

Petronas has proposed to construct a gas processing plant and gas pipeline that stretches from the gasfields to the port of Djibouti. The company also proposed to drill additional wells in Calub and Hilala. So far ten wells in Calub and four in Hilala were drilled. The gas reserve is estimated at 113.3 bn cm. Petronas will conduct a seismic survey in block 11 and 15 and will drill exploration well. The company has proposed to invest up to $ 1.9 bn for the gas development project. Petronas would pay $ 75 mm pre-development cost that the Ethiopian government spent on the Calub and Hilala gasfield.

Chinese oil firm to conduct seismic survey

 Friday 12th May 2006

Chinese oil firm Zhongyuan Petroleum Exploration Bureau (ZPEB) is to start seismic surveys in east Ethiopia's Ogaden basin next month. ZPEB and Malaysian oil giant Petronas have agreed on the details of the petroleum exploration project which is to be launched in the Ogaden basin next month.  

ZPEB is contracted by Petronas, which was awarded blocks in the Fer Fer, Warder and Genale regions of the Ogaden basin. The total area covers about 93,000 sq km.  

ZPEB has been active in Ethiopia for some years. In 1998 it was contracted by the Ethiopian government to make eight gas wells in Calub ready for production.  

Geological data suggests that Ogaden and four other sedimentary basins in Ethiopia are endowed with oil and natural gas. In March the Ministry of Mines and Energy invited bidders to submit letters of interest in development of the Hilal and Calub gas fields in Ogaden. The reserve in Calub, 1200km east of Addis Ababa is estimated at 2.7 trillion cubic feet, while the reserve in Hilala, 75km east of Calub, is estimated at 1.7 trillion cubic feet, which amount to a combined total area of 285 square km. Interest was expressed by countries in the Middle East, China, Russia and India.

Blood for oil in the Horn of Africa

On April 24, 2006, the Ogaden National Liberation Front (ONLF), an ethnic Somalian separatist group in eastern Ethiopia, warned foreign oil companies against exploring for oil in their homeland: "So long as the Somali people of Ogaden are denied their basic rights to self-determination, the exploitation of natural resources in Ogaden for the benefit of the Ethiopian regime or any foreign firm will not be tolerated."

Exactly one year later, the Financial Times is reporting that the ONLF has taken credit for killing 65 Ethiopians and nine Chinese at an oil exploration field in northern Ogaden.

The Chinese were employees of Zhongyuan Petroleum Exploration Bureau, a subsidiary of the huge Chinese oil company Sinopec, which had been hired by the Malaysian oil company Petronas to explore for oil and natural gas in Ogaden. But ZPEB is far from the first foreign oil company to drill in eastern Ethiopia.

In 1935, reported Time Magazine, "Emperor Haile Selassie I made a last desperate effort to forestall an Italian invasion by offering to 'rent' as much as half of Ethiopia to a big U.S. or British oil company." Ten years later Sinclair Oil nabbed a 50-year concession. Sinclair was followed by Tenneco Oil, which discovered significant deposits of natural gas in Ogaden in 1974. But all the U.S. oil companies were kicked out by the revolutionary Marxist regime of Mengistu Haile Mariam, who replaced them with the Soviet Petroleum Exploration Expedition, which drilled its own holes in the sedimentary basin of Ogaden. Not uncoincidentally, the Soviets also provided massive military assistance to Mengistu that enabled Ethiopia to successfully win complete control of Ogaden from Somalia.

Cold War power politics can be held at least partially responsible for the ongoing anarchy, chaos and war that continue to ravage the Horn of Africa and keep Somalia, Eritrea and Ethiopia at each other's throats. But the Cold War is over, and American and Soviet/Russian oil companies are long gone. Now it's China's turn to get embroiled in the mess. For years, the rebel activity in eastern Ethiopia between the ONLF and the government has been described as a "low-profile armed conflict." Not anymore.

-- Andrew Leonard

Ministry to Revoke SIL's Petroleum Development License

 The Reporter (Addis Ababa)
January 14, 2006
Posted to the web January 16, 2006

The Ministry of Mines and Energy (MME) is to revoke the petroleum development agreement it signed with the Jordanian company, SI- Tech International (SIL).
In 2003 the ministry granted SIL a license granting the company the right to develop the natural gas reserves in the Calub and Hillala localities in the Oganden basin. SIL had a plan to build a gas refinery plant, an electric power station as well as a fertilizer and cement factories. The company previously announced that it had allocated an initial capital investment of 1.5 billion dollars.

The company was supposed to commence work on the first phase of the petroleum project, the construction of the gas refinery plant, in July 2004. However, it was unable to launch the project according to schedule. In November 2005, the minister of MME, Alemayehu Tegenu, warned SIL that the ministry would revoke the petroleum development license unless the company started work on the project within 90 days. Officials of SIL said they were unable to launch the construction because of the inflated price of steel and the poor condition of the road to the gas fields. Minister Alemayehu however, said the explanation given by the officials was unacceptable.
The 90-day ultimatum will come to an end by next month. The ministry told The Reporter that since the company failed to operationalize the project it would nullify the petroleum development license.

The gas fields are located 1200 kms east of Addis Ababa. The gas reserve in Calub, which was discovered in 1973, is estimated to be 76 billion Cu.m. The reserve was discovered by Tenneco, an American oil company. The second gas reserve found in Hillala locality is estimated to be 42 billion cu.m The Hillala gas reserve was discovered by a Russian company, Soviet Petroleum Exploration Expedition (SPEE).

SIL to invest 1.5 billion USD in the mining industry

"At last we made it!" Mohammed Dirir

By Tamiru Geda

Many people including government officials were fed up with the frequent interruptions in negotiations for the exploration of natural gas, in the last three decades.

Lately however, things seem to be looking up for natural gas exploration, thanks to some committed petroleum companies which have shown keen interest in joining the Ethiopian government, particularly the Ministry of Mines in investing and exploring the natural gas fields of the nation.

Ambassador Mohamed Dirir said that the Minister of Mines is one of many Ethiopians eager to see this resource available and ready for consumption. He made the statement at the signing ceremony of the Petroleum Development and Production Agreement, in the Hilton Addis with the Middle East based company, Si Tech International (SIL).

Minister Mohamed expressed his happiness on the occasion. Using the same tone that the American administrator of Iraq used after the capture of Saddam Hussein, the Minister declared, "Ladies and gentlemen, at last we made it!" to the cheers of delegates from government offices and representatives of SIL.

Ziad I.Kh Mango, Chairman of SIL was present to sign the agreement with the Ministry of Mines for exploration of the Hilala gas reserves in the desert area of the Somalia Regional State of Ethiopia.

His company, he said, is committed to invest in Ethiopia and expressed regret that they did not do it earlier. "We are here for good and to invest USD 1.5 Billion to develop the 280 square kilometers of gas reserves in Calub and Hillala area." Zaid also promised to work with the Ministry of Mines as a partner.

According to the company"s work plan, it will install a GTL plant in Dire-Dawa, with a capacity of producing 34 thousand barrels of petrol per day. It will also produce 20 million barrels of liquid petroleum such as benzene, Kerosene and diesel by using gas processing technology at Calub, within the next two years.

Calub to be given to private campanies on concession

By Kaleyesus Bekele

The Ministry of Mines told the Reporter last week that it was read to give the Calub gas field to private companies on concession.

Since the effort to privatize the Calub S.C.  could not be successful, it was decided to give the gas field to private companies on concession, it was learnt.

The Ministry said it was ready to negotiate with any company which had the know-how and the financial capacity to exploit the Calub natural gas reserve estimated at 76 billion cu.m.

Though officials of both the Ministry of Mines and the Calub Gas S.C had held talks with several foreign oil and gas companies to jointly develop the reserve, their effort could not bear fruit.

Methanol and STROYTRAN GAZ, the Russian oil and gas companies, signed last week a Memorandum of Understanding with the Ministry to develop the reserve. However, the companies could not sign the final agreement since they did not have the finacical resources to implement the project.

According to the Ministry, the companies came up with only the technology and asked the government to solicit funds from the international financial institutions. Two month ago the Ministry proposed to Prime Minister Meles Zenawi to dissolve the Calub Gas S.C. However, Meles did not as yet approve the proposal.

The Calub natural gas reserve was discoverd in 1973 and nine wells are ready to go into production.

Russians sign for 50 percent shares in Calub

ADDIS ABABA, February 04, 2002-- A Russian oil company, Methanol, has signed a memorandum of understanding both with the Ministry of Mines and Calub Gas Share Company to own 50 percent shares in Calub Gas, while it commits itself to invest 80 to100 million USD during the initial phase.

Top executive of Calub Gas told the English weekly Fortune that the memorandum of understanding (MOU) requires both parties to jointly develop gas fields on the 76 billion cubic meters natural gas reserve, located 1200 kms south east of Addis Ababa in the Somali State.

Sinknesh Ejigu State Minister of Mines and Hialemelekot Teklegiorgis Board Chairman of Calub and State Minister of Defense signed the agreement with the director of Methanol.

Jihad Abakoyas General Manger of Calub told Fortune that the Russian company had agreed to form a joint venture share company owning 50 percent shares to exploit the gas reserves.

The General Manager revealed that the plan to develop the fields involves the construction of four refinery and petroleum extraction plants within the Calub area, with an investment reaching about 500 million USD.

The first phase of the project consists of building the first gas refinery plant.

Jihad revealed that the investment by the Russian company would increase through time depending on the results obtained from the first phase of the project.

He added that knowledge and technology transfers in executing the project would be vital.

In a similar development, another five-member Russian team representing Story Trans Gas Share Company, an oil and gas company has arrived in Addis Ababa and begun negotiations with the Ministry of Mines to engage in oil and gas explorations and development in Ethiopia.

According to Jihad, Story Trans is interested in exploration of petroleum in the Ogden basin and Gambela region. He said that the company's representatives were planning to fly to these areas for a site visit.

The delegation is currently conducting preliminary studies and is collecting date, reports and other relevant information about the basins. Story Trans is also interested in Calub Gas and holding talks with the officials. - Fortune

World Bank Leaves Off Extending Loans to Calub


The World Bank has reportedly suspended releasing the loan it had pledged to extend to Calub Gas S.C. demanding the government to privatize the 95pc share it owns in the company to continue financing the project in return. According to our sources, the bank decided to refrain from disbursing the loan at the beginning of the current fiscal year. An initial survey conducted by the World Bank puts the Calub Gas project cost at 85.96 million Dollars of which it has committed to finance 66.31 million Dollars while the remaining is to be made up from local sources. Following the agreement with the Ethiopian government on June 23, 1994, the bank commenced to outlay some portion of the agreed loan and construction was launched in September 1995.

The standard of the loan is in International Development Association (IDA) terms with a maturity of 40 years and three years grace period. Fortune learnt that the bank's abrupt action to withhold the remaining amount of the loan is in a bid to pressing the government to speed up the privatization process of the share company to be entirely controlled by private entities. World Bank officials have declined to comment on the issue, while the general manager of Calub, said to be out of town, could not be available for comment. A minority share of only five per cent in the company is currently in the hands of private businesses and individuals, who have invested 102 million Br in aggregate. The renowned coffee exporter, Mohamed Oksedeh, is in the list of shareholders having stakes worth 200,000 Br in the company

The Ethiopian Privatization Agency had put Calub Gas S.C. on tender two years ago but attempts to privatize the company failed to materialize. An official in the privatization agency told Fortune that the bid was thwarted because of low values offered by the prospective buyers, questioning the accuracy of the amount of gas deposits declared to be available for exploitation, estimated to reach 76 billion cubic meters.

According to sources, those who have shown interest in Calub say the quantity of gas deposits, unlike other minerals such as gold, can not specifically be predetermined. Information obtained from the agency indicates four companies, Sheik Al-Amoudi's investment arm- Midroc, Santafe, Matle and Norex Group, participated in the bid. The bidders also came up with a pre-condition requesting a guarantee from the government that ensures all the towns in the eastern part of Ethiopia, including Dire Dawa and Harrar, would use electric power generated utilizing gas produced by Calub. Another reason given for the delay of the privatization process, according to the official who said he is unaware of the bank's decision to suspend the loan, is the memorandum of understanding signed between Calub and an American Company. The agency official also said that the shareholders of Calub that own the five per cent share have also objected to the tender saying that they were not informed about it prior to the privatization process.

After the cancellation of the first bid, the agency has not shown sign until now to issue a re-tender. The information officer at the agency said that Calub is not included in the list of enterprises that are on the auction block to be privatized in the short run. An American company, Cal Tech International Corp, and China National Petroleum Corporation, a Chinese company, have recently shown interest in Calub Gas S.C. for a joint venture development of natural gas. However, tangible results have not so far evolved.

The Calub Gas Project, which is thought to be a cash-cow business, comprises three components: a commercial part consisting of preparation and completion of the gas wells, construction and operation of the petroleum extraction and processing plant and privatization promotion; a regional development scheme for Ethiopians in the south eastern region; and technical assistance to the Ministry of Mining and Energy. The designing work of the refinery and the preparation of bid documents to hire a contractor for building the facility were carried out by a British firm and submitted to the World Bank, which was evaluating them until recently. The preparation of eight production wells for exploitation have been carried out and completed by a Chinese firm contracted for five million Dollars.

Sources close to the project say that the cost to launch a full-scale production, including a Urea fertilizer factory related to gas production and revised project of constructing a pipeline extending 700kms to channel gas from the production wells to Awash, where the refinery is planned to be erected, could escalate to the neighborhoods of 1.5 billion Dollars. Fortune learned that so far 96 million Dollars have been invested in the Ogaden basin. The Ogaden Basin exploration history dates back to 1920 pioneered by Standard Oil Company that first carried out a geologic survey. Since then 14 companies had taken concession and conducted exploration surveys and mapping. Tenneco, an American company at a depth of 3732 meters, discovered natural gas in 1972. Although 29 years have elapsed since gas was first discovered in Ethiopia, the country, in a rueful turnout, has not been capable to see the fruits of the discovery to date.

American Company Contemplates Calub Gas Exploitation


An American company, which was contemplating to invest in power generating projects negotiating with EEPCo last year, has now shown interest in Calub Gas S.C. for a joint venture development of natural gas, although concrete results have not yet materialized. Representatives of Cal Tech International Corp., who were here a month ago, were briefed by officials of Calub Gas on the existing potentials and were provided with strategic data and information on the project.

Sources said that the company was requested to produce the necessary documents, which include the company's base of registration and legal status, funding, track records of the past three or four years, that should all be authenticated by the U.S. government, to start negotiation for concluding a deal. According to our sources, the company has verbally pledged to finance the construction of the pipeline that would be used to carry crude gas from the gas field to the central processing plant and refinery, which is intended to be erected at Awash, approximately 700Kms from the production wells.

The designing work of the refinery and the preparation of bid documents to hire a contractor for building the facility were carried out by a British firm and submitted to the World Bank, which was evaluating them until recently. Though Cal Tech had promised to come back in two weeks with the required documents, sources said it is now a month and there is no sign of its coming back. This same company had written a letter of intent last year to invest more than 300 million Dollars in power generation, but it is unknown where the negotiations with EEPCo presently stand.

Discovered in 1972, the Calub natural gas resource is estimated to reach 76 billion cubic meters and currently eight production wells stand ready for exploitation after being prepared and tested by a Chinese company, which was contracted for 5.6 million Dollars to undertake the job winning a tender in 1996. The company completed preparing the gas wells for production in late last year. Sources close to the project say that the cost to launch a full-scale production, including a UREA fertilizer factory related to gas production, could reach a level of 1.5 billion Dollars.

Africa "Key Source" for Energy Supply and Development Senior U.S. energy official testifies before Congress- March 16 2000??;

Africa is a "key source" of diverse energy for the United States and will likely become the next important emerging market in trade and investment, energy resources, and energy consumption, a senior U.S. energy official told the U.S. Congress March 16.

In testimony before the Subcommittee on Africa in the House of Representatives, Calvin R. Humphrey, principal deputy assistant secretary for international affairs at the Department of Energy, also reminded lawmakers that Africa is the third largest oil exporter to the United States and plays an "integral role in U.S. efforts to maintain a diversified oil import base."

Humphrey chronicled a wide range of U.S. investment in Africa's energy sector, which includes:

-- Chevron's participation as the managing partner for the West African gas pipeline, which is designed to connect Nigeria's gas reserves to markets in Benin, Togo, and Ghana;

-- Exxon-Mobil's efforts in leading the development of the Chad Export Project (CEP), a proposed $3,500 million project to produce and transport 250,000 barrels of oil per day from southern Chad through Cameroon for export to world markets, including the U.S.;

-- Dallas-based Triton Energy's allocation of $191 million to invest in the development of the Ceiba Field and continued exploration and appraisal activity in Equatorial Guinea;

-- the U.S. firm Sicor and Ethiopia's announcement that they have signed a $1,400 million joint venture to develop a huge gas field in the east of the country and build a pipeline and processing units;

-- the signing by Enron, an oil and gas firm in Houston, of a power purchase agreement to supply emergency electricity to state-owned power utility Nigerian Electric Power Authority (NEPA) through 30-megawatt power barges located on the coast of Lagos State.

Sicor plans 375-mi Ethiopian line

January 2000 Vol. 83 No. 1

 Construction Report

Sicor, Inc., and the Ethiopian government have signed a memorandum of understanding to build a 375-mi, 24-in. natural gas pipeline in Ethiopia.

The $300-million pipeline would be part of the $14-billion Gazoil Ethiopia project to develop synthetic fuels using gas-to-liquids (GTL) technology.

The line would transport natural gas and associated fluids from the Calub and Hilala fields in southeast Ethiopia to Awash. There, a planned cryogenic liquids plant and a refinery will convert the gas and liquids into commercial fuels using GTL technology.

Sicor plans to commence a 12-month pre-development phase in February 2000, involving feasibility, route, and market-demand studies.

The company plans to award an $800-million construction contract for the pipeline and plant in late March 2000.

Construction could start in late March 2001 for a September 2002 in-service.

Small firm signs $1.4 billion deal to develop gas project in Ethiopia

December 20 1999

Houston Business Journal

Monica Perin

A small, privately held Houston company has struck a deal on a $1.4 billion energy privatization project in Ethiopia.

Sicor Inc. and the Federal Democratic Republic of Ethiopia have signed an agreement to form a joint venture, the Gazoil Ethiopia Project, which will build a 375-mile natural gas pipeline and a series of processing plants.

Sicor will hold an 80 percent stake in the joint venture, and the Ethiopian government, 20 percent.

Sicor is a six-month-old corporation -- 70 percent of which is owned by Chairman Ronnie F. Monk.

Monk formed Sicor from Cogen International Management, a partnership that was in the business of assembling and predeveloping pipeline and power projects.

Sources familiar with the negotiations say Sicor's primary competitor in the bidding was Houston-based Santa Fe Snyder Energy Co.

The project is expected to have a major impact on Ethiopia, an agricultural country that still uses wood for fuel, causing massive deforestation and land erosion.

In addition to providing liquid propane gas, electricity, water and fertilizers for domestic use, the project will generate other fuel products for export, which would greatly improve Ethiopia's foreign exchange position. The country will become a net exporter of fertilizers for the first time, a government spokesman said.

Under terms of the agreement, the Gazoil Ethiopia Project will acquire two concessions in the Ogaden basin in southern Ethiopia where four trillion cubic feet of gas and 13.6 million barrels of associated liquids were discovered by Tenneco in the 1970s.

The joint venture will also acquire 95 percent of the Calub Gas Share Co. from Ethiopia under privatization laws. The joint venture will pay the Ethiopian government $111 million for the gas company, which has carried out all the exploration and development work in the project area to date. Under the new name Gazoil Ethiopia Share Company, it will be expanded to take over all production work for the project.

The pipeline will transmit gas and other liquids to the town of Awash, 75 miles east of the capital city, Addis Ababa. At Awash plans call for construction of a cryogenic liquids plant and two gas-to-liquids process systems with capacity to process 200 million cubic feet of natural gas per day. The end products will be synthetic fuels and petrochemical feedstocks plus steam that will generate electricity and potable water.

A planned refinery will produce products including diesel, gasoline, kerosene and jet fuels. The gas-to-liquids system will also produce some 500 tons of ammonia per day as feedstock for a urea plant to be constructed.

Sicor will begin the pre-development phase of the project in late February, says Monk. It is expected to be completely on stream by Sept. 1, 2002.

Monk's previous partnership did pre-development studies for the Attacama Project in South America, a 450-mile pipeline from Argentina over the Andes Mountains to northern Chile. The project was ultimately sold to CMS Energy in Michigan.

Now, Monk says, Sicor is doing strictly gas-to-liquids projects which the company develops and owns. Sicor operates only in the Arabian Gulf and sub-Sahara Africa, where it has six other projects under consideration. Monk says he expects to sign an agreement on a project in Yemen after the first of the year.


Ethiopia Signs $1.4 Billion Deal With U.S. Firm Sicor

Reuters; December 9, 1999

ADDIS ABABA (Reuters) - Ethiopia said on Wednesday it had signed a $1.4 billion joint venture deal with U.S. firm Sicor to develop a huge gas field in the east of the country and build a pipeline and processing units.

The joint venture, Gasoil Ethiopia Project (GEP), will develop fields in the Ogaden basin where four trillion cubic feet of gas and 13.6 million barrels of associated liquids were discovered in the 1970s, government spokesman Haile Kiros told Reuters.

The Ethiopian government will hold a 20 percent stake in the joint venture and Sicor, based in Houston, Texas, the remainder.

Details of financing were not given. GEP plans to construct a 375-mile, 24-inch gas pipeline to transmit gas to the town of Awash, around 75 miles east of the capital Addis Ababa, on the country's main railway line and highway.

Haile said the joint venture will construct a cryogenic liquid plant to strip mostly liquefied petroleum gas (propane and butane) and condensate from the gas, as well as two gas-to-liquid systems to process dry gas.

The plant would process a total of two billion cubic feet of gas a day into 20,000 bpd of fuel and petrochemical feedstocks. Waste steam would fuel a 168 megawatt power plant, he said.

The joint venture is expected to start 12 months of pre-development work in February with production slated to start in 2002.

Haile said the agreement was hugely important for Ethiopia, where the felling of trees for fuel has caused major deforestation.

The ammonia by-product from gas processing would make Ethiopia a net exporter of fertilizers for the first time, Haile said.

A Second Wind For Calub Gas

The International Oil & Gas Newspaper


Vol 4, Week 5, 5th February 1999

Barry Morgan from ACCRA

Interest is slowly reviving in Ethiopia�s Calub gas project after the country's Privatization Agency previously dashed hopes by withdrawing four bids submitted for the development of the onshore field, which contains an estimated 2.71 trillion cubic feet.

One of the four, Santa Fe Energy has renewed contract with the energy ministry, a department source said.

The principal reasons for refusing the bids from Santa Fe, Mapple, Knorex and Midroc was their "failure to fully comply with requirements" enabling the government to recover the $97 million it invested in phase-1 of Calub, located on block OG-1.

Two companies from the Middle East and the US have also shown interest and the agency "is now ready to accept new and revised offers", the source said. "Whether we accept the recovery of less than the full project cost will depend on the investment plan submitted."

The World Bank has earmarked an additional $74 million for the project, which aims to convert gas from the Ogaden basin into power, fertilizers and sundry industrial feedstock for export. The ministry also wants to explore the Hilale find some 80-km northwest of Calub.

Volume 3, issue #2 - Tuesday, February 02, 1999

Ethiopia withdraws bid for sale  of gas company

20-12-98 The Ministry of Mines and Energy of Ethiopia announced the  government's decision to reject the bid for the privatisation of the Kalub  Gas Share Company. 

The Ministry said that the Ethiopian government has decided to withdraw  the bid for the sale of its stake in the company because it found the bid  results unsatisfactory. 

The Ministry said the prices quoted and the terms stated by the bidders  who include four international companies are not commensurate with those  stipulated in the bid document. 

The Ethiopian Privatisation Agency invited bids earlier this year for  selling off the government's stake in the company. Four international companies  including an American company have bidden for the competition. However,  the prices gave by the four companies were unsatisfactory to the Ethiopian  government. 

The Kalub Gas Share Company, established in accordance with the Ethiopian  law, aims at tapping the natural gas resources found in the Ogaden area. 

According to the Ministry, a study hasconfirmed the availability in  the area locally known as Kalub of 68 bn cm of natural gas and a loan of  over $ 74 mm has been obtained from the World Bank for the natural gas  project. 

The Ministry said, the Ethiopian Privatisation Agency has been taking  measures to sell off government's stake in the company, but added that  now the company will continue in its present entity.

Inventory of fossil fuel  extraction projects financed by World Bank Group,

mid-1992 to 1997


Type of Industry: Natural gas field development 

Subsidized Project: Calub gas development 

Location: Calub natural gas deposit, Ogaden Basin, Ethiopia 

Owner of Project: Calub Gas Share Company (state-run) 

G-7 TNC Involvement: Parsons Corp. (U.S., awarded $50 million  contract for construction of gas processing plant) 

World Bank Agency: IDA 

Amount of Financing (estimated total cost): $74.3 million of  $130.8 million, with cofinancing from African Development Bank ($27 million)  and the Netherlands ($4 million). 

Year of Approval: FY1994 

Reserves/Production: Calub holds an estimated 74 billion cubic  meters (2.6 TCF) of natural gas deposits. 

World Bank Description:

"By increasing the availability of fuel from the Calub natural gas  deposit in the country's southeast region, Ethiopia's unbalanced structure  of energy supply will be partially righted and the supply of petroleum  products needed in the modern sectors of the economy increased. Road rehabilitation,  technical assistance, and a poverty-alleviation component -- aimed at supporting  income diversification among poor urban fuelwood carriers --is included."  (World Bank Annual Report FY 1994) 


This is Ethiopia's first natural gas field development. Construction  is to start in 1997 and be completed in 1998. Parsons called the project  "a starting point for Ethiopia's long-term development of fossil-fuel resources."  (Business Wire, Feb. 6, 1996; Xinhua, Feb. 23, 1997; Oil & Gas Journal,  Feb. 12, 1996; Africa News, Feb. 26, 1997; ESP-Business Opportunities in  Africa & the Middle East April 1, 1996)




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