Ethiopian Reporter -- South West Energy, a new company registered in Hong Kong, is to prospect for petroleum in the Ogaden basin, in East Ethiopia.
Last Monday, South West Energy and the Ministry of Mines and Energy (MoME) signed a petroleum exploration and development agreement. The Ministry granted a license that enables the company to explore and develop petroleum reserves. The exploration area covers 21,187 sq. km. of land in Degahabur locality in the Ogaden basin. The Ogaden basin, one of the most promising areas for petroleum development, is found in the Somali Regional State. The sedimentary basin covers an area of 350,000 sq. km.
According to the agreement, South West Energy will have an exclusive right that allows it to explore and develop petroleum reserves in the exploration area. The agreement is valid for the next 25 years and the initial exploration period will be four years. The company will spend a minimum capital of 3.5 million dollars for the exploration studies to be undertaken in the next four years.
The company presented a financial guarantee worth two million dollars to the MoME. The Ministry usually asks a company that intends to sign petroleum exploration and development agreement for a five million-dollar financial guarantee. South West Energy will pay 250,000 dollars signature bonus payment to the Ministry. The Ministry will use the money to collect geological data, to upgrade the existing data and to enhance its capacity in monitoring petroleum exploration activities.
Tewodros Ashenafi, chairman of South West Energy told The Reporter that the company was established last year with an initial capital of five million dollars. Tewodros, an Ethiopian by birth and an American by naturalization, said that the company was established by seven individuals envisioned to invest in oil and natural gas development. "Previously we invested on oil and gas stock markets. Since we wanted to engage in oil and gas exploration and development, we established our new company in 2004, Tewodros said.
Alemayehu Tegenu, Minister in the MoME, said that the fact that the chairman of the company was an Ethiopian by birth made the signing ceremony unique. Alemayehu praised Tewodros for his effort to bring foreign investment to Ethiopia. Alemayehu said the Ogaden basin was a prospective area for petroleum discovery. "The mining sector could play an important role in alleviating poverty. We believe that South West will properly undertake the exploration activities," Alemayehu said. "Signing an agreement is not an end by itself. The company should implement the exploration project and bring a fruitful result that will benefit the Ethiopian people," he said. He noted that the Ministry will supervise the company's exploration activity. "We will check out whether or not the company would discharge its responsibility," he added.
Tewodros Ashenafi, on his part, said the company had a firm commitment to invest in Ethiopia. "We will do everything we can to realize the project," he assured officials of the MoME. In an exclusive interview with The Reporter, Tewodros said the company would bring the expertise required for the exploration activity. According to him, the company could bring a contractor that will undertake the geophysical survey. "We have two options. The first option is to hire petroleum experts. The second option is to contract a petroleum company that will undertake the seismic survey in our concession," he added. The company anticipates to be operational within five months.
Last August, the Malaysian company, Petronas, took three concessions in the Ogaden basin. Petrona's exploration areas cover an of 36,796 sq. km. at Wal-Wal and Warder, 30,611 sq. km. at Kelafo and 25,571 sq. km at Genale. The company, which made three million dollars signature bonus payment, allocated 15 million dollars for the exploration activity to be undertaken in the three areas. In 2003 Petronas took the Gambella concession in West Ethiopia and it has been undertaking petroleum exploration activity in the Gambella basin.
Another company called Pexco Exploration, a company registered in the Netherlands and based in Malaysia, last October took a concession in the Ogaden basin. The exploration areas cover an area of 29,865 sq. km in Ferfer and Abred localities. Pexco Exploration allocated five million dollars for the initial exploration period (four years) and it effected a one million-dollar signature bonus payment. Both companies, Petronas and Pexco, hope to commence work on the exploration projects by next year.
Abiy Hunegnaw, head of the Petroleum Operations Department with the MoME, told The Reporter that the Ogaden basin was the most prospective sedimentary basin for oil discovery. Abiy said the fact that the geological formation of the Ogaden basin was similar with the basins in the Middle East made Ogaden a very promising area. "Since the second world War several companies had undertaken geological surveys in Ogaden. And the gas discovery in Calub and Hillala localities confirms the oil prospectivity of the Ogaden basin," Abiy said. "The number of companies coming to Ethiopia for petroleum development projects is increasing. And the ministry encourages these companies to undertake exhaustive geological surveys in the exploration areas," he said.
Regarding South West Energy, Abiy said that the company could outsource the expertise and technology required for the exploration project. "The most important thing is finance. If the company has adequate financial resource it could hire experts. But we will make sure that the company hires qualified contractors," he added.