Saturday, October 09, 2010

Ethiopian company buys Petrona’s concessions in Ethiopia

Petronas discovers gas show in exploration well

South West allocates 200 million USD for exploration

By Kaleyesus Bekele source(The Reporter)

As the Malaysian oil and gas giant, Petronas, which has been prospecting for petroleum reserves in Ethiopia since 2003, winds up its operation and is in the process of pulling out from the country, an Ethiopian oil and gas company, South West Energy, this week announced that it had agreed with Petronas to buy all the former’s petroleum exploration concessions including the Calub and Hilala gas fields found in the Ogaden baisn.

In a statement sent to The Reporter, South West said last month it agreed to purchase from PETRONAS Carigali Overseas Sdn Bhd (PETRONAS Carigali), all of its oil and gas interests in Ethiopia. The transaction is expected to be completed during the first quarter of 2011 following the fulfillment of certain conditions precedent, including regulatory approval.

PETRONAS Carigali Overseas Sdn Bhd, which is the international exploration and production subsidiary of Malaysia’s national oil company, PETRONAS, is a party to five petroleum production sharing agreements (PSAs) for oil and gas exploration and production in Ethiopia. SouthWest Energy has agreed to purchase 100 percent of PETRONAS Carigali's interests in each of those PSAs. The blocks and contract areas covered by the PSAs are Blocks 3&4, 11&15, 12&16, 17&20 and the Calub & Hilala contract areas.

All of the blocks and contract areas are located southeast of Addis Ababa, in the Ogaden Basin, which covers 350,000 sq km and is the largest proven hydrocarbon bearing sedimentary basin in Ethiopia with proven gas reserves of 2-4 TCF.

"This is a fantastic opportunity for SouthWest Energy to expand its exploration and production activities in Ethiopia," said Tewodros Ashenafi, Chairman and CEO of SouthWest Energy. "This transaction will transform SouthWest Energy into the leading force in the Ethiopian upstream industry. We intend to develop these new blocks together with our existing blocks as quickly as possible and to work on developing transport solutions for hydrocarbon in the Ogaden Basin. This development will be a cornerstone not only for SouthWest Energy's future growth, but also for the oil and gas industry in Ethiopia."

Orrick, Herrington & Sutcliffe LLP is SouthWest Energy's legal advisors on the transaction, and Standard Bank Plc is acting as SouthWest Energy's financial advisor. SouthWest Energy (H.K.) Limited was formed in 2005 and is the only Ethiopian-owned company to successfully obtain an energy concession in Ethiopia. SouthWest Energy is currently developing Blocks 9, 9A and 13 in the Ogaden Basin under PSAs it entered into in 2005 and 2007.

South West declined to disclose the amount it agreed to pay for Petrona’s assets. However, the company told The Reporter that the planned budget for exploration is about USD 200 million. The company is planning to produce petroleum products such as LPG for the local and international markets, adding it has the required financial resources in place to move on an aggressive development program. South West says it plans on undertaking exploration the work by itself but has not ruled out a partnership with the right party. It intends to conduct a full exploration program of acquiring more seismic and drilling works. It plans to drill 3 exploration wells and one appraisal well. Petronas has discovered a natural gas show in an exploration well it drilled in the Ogaden basin in the company’s Genale concession.

This was disclosed at the company’s internal meeting held in Addis Ababa Golf Club last Monday. The meeting was chaired by Petronas's Ethiopian Office Manager, Mr. Azmir Gamril, and petroleum experts of the company made a technical presentation on the findings of the exploration work that is being undertaken in the Ogaden basin. Officials of the Ministry of Mines drawn from the petroleum operations department attended the full-day meeting.

Experts of Petronas made a briefing on the testing results of the two exploration wells drilled in the Genale and Hilala localities. The experts said they have noted gas flow in the exploration well drilled in the Genale block. However, the experts said the gas flow was low adding that the gas oozed from the well. Testing is conducted after drilling by sucking out air from the well. Due to the low pressure oil or gas will flow into the well from the surrounding, if there is any.

The experts said the exploration well drilled near the Hilala gas filed was aborted at a depth of 2500 meter due to a problem with the seismic data collected from the area a long time ago. The company used an old seismic data collected by the Soviet Petroleum Exploration Expedition (SPEE) in the 1980s to drill the well (Hilala A1). The experts said the work on Hilala A1 has failed due to the inaccurate data they used to identify the place where to drill. “There was a problem with the location of the well,” the experts said. The experts noted that they were still analyzing the results of the test results of the two wells, adding that they would disclose the results when the investigation was finalized. The experts did not mention about future exploration work or if the company would relinquish its concession in Ogaden.

Petronas has already laid off most of its local staff in Ethiopia. The letter issued to the employees said that due to the winding up of its operation in Ethiopia it was in the process of reducing the number of its staff to the level of its current activities. “Consequently, your employment contract shall be terminated as of October 31, 2010,” the letter said. Employees of Petronas are in the dark and do not know if they would be paid compensation.

1 comment:

Anonymous said...

What were the regulatory officials doing all this time? Attending dinner parties of Petronas and visiting Kualalanpur for no and any reason. Where is Petronas's apprasing and development program? was is make public to the Ethiopian People? Staying for 3-4 years sleeping on it and now they are coming up with relenquish news. Preventing others to develop the only discovery of the country being a stambling block. who is accountable and to be questioned now? To me the gvoernment needs to put his hands more and be commited to end the visiuos circle on the history of the development of the Natural Gas discoverd over tow decads. Petronas is telling us that they are off targate because of the previous erronious data? Do they selected site depending on Russian data collected before 25 years. But they were telling us that they came up with new technology the like 3D siesmic and do better job than them and subsequent better results. To your wonder ater thes all they are telling us they did nothing but analize the previous data end end up in wrong conclusion. Let them cheat themselves but not the Ethiopians.