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Oil in Ethiopia?Posted: Sun Jan 19, 2003 8:02 am Source: EthioIndex Medrek-------------------------------------------------------------------------------- PINEWOOD RESOURCES LTD. (a Petrolem Company) Canada NEWS RELEASE Pinewood Resources Ltd. reports further details regarding the Petroleum Production Sharing Agreement (the “PSA”) signed by its wholly owned subsidiary, Gambela Petroleum Corporation (the “Contractor”), with the Ethiopian Government. The PSA, the effective date of which is January 24, 2001 (the “Effective Date”), grants the company exploration, development and production rights on the Gambela Oil Concession located in the Gambela area of southwestern Ethiopia. The concession encompasses an area of approximately 15,000 square kilometres and includes the entire Melut Basin where it passes from the Sudan through the southwestern toe of Ethiopia and back into the Sudan. The term of the PSA consists of an Exploration Period, and a Development and Production Period, both of which may run concurrently. The initial term of the Exploration Period is four years, during which the Contractor is obligated to carry out certain minimum exploration work and make certain minimum exploration expenditures in order to maintain the PSA in good standing. The Contractor then has the right to extend the Exploration Period for an additional two years, during which the Contractor is obligated to carry out certain additional exploration work and make certain additional expenditures. The Contractor then has the further right to extend the Exploration Period for another two years, during which the Contractor is obligated to carry out certain additional exploration work and make certain additional expenditures. In the event the Contractor exceeds the work obligations of the initial Exploration Period or the first extension thereof, then such excess work and corresponding expenditures shall be credited toward the work and corresponding expenditure obligations of the following extension of the Exploration Period. In the event of a Commercial Discovery, a Development Area shall be determined for the Commercial Discovery, and a Development and Production Period shall commence for the Development Area which shall continue for a term of twenty-five years. In the event production from the Development Area remains economically feasible after 25 years, an extension of the Development and Production Period for the Development Area may then be obtained. In the event the Contractor makes more than one Commercial Discovery, a Development and Production Period shall be determined for each and every Development Area independent of the term of any other Development Area with extensions available as above. During the initial Exploration Period, the Contractor must: (a) incur minimum annual exploration expenditures of US $50,000 in the first year, US $2,100,000 in the second year, US $900,000 in the third year and US $2,000,000 in the fourth year; which is inclusive of; (i) shoot, process and map a minimum of 1,000 kilometers of seismic costing not less than US $3,000,000, such shooting to commence within 17 months of the Effective Date; (ii) drill one exploration well to a minimum depth of 2,000 meters or 100 meters into basement, whichever first occurs, at a minimum cost of US $2,000,000, such drilling to commence within 38 months of the Effective Date. During the first extension of the Exploration Period, the Contractor must: (a) shoot, process and map a minimum of 200 kilometers of seismic costing not less that US $600,000 in the first year of the extension period; and (b) drill one exploration (b) drill one exploration well to a minimum depth of 2,000 meters or 100 meters into into basement, whichever first occurs, at a minimum cost of US $2,000,000 in the second year of the extension period. During the second extension of the Exploration Period an additional 200 kilometers of seismic is required plus one additional exploration well at total minimum cost of US $2,600,000. The Contractor is also required to make annual land rental payments for the unsurrendered exploration lands ranging from US $4 to US $10 per square kilometre during the Exploration Period, and US $200 per square kilometre for the Development Areas during the Development and Production Periods. The PSA provides for the Government of Ethiopia to receive a sliding scale royalty ranging from 6% to 12% on crude oil production from each Development Area, and 2% to 6% on natural gas production. The PSA provides for cost recovery from the “Cost Oil” with the Government receiving a sliding scale share of the “Profit Oil” ranging from 10% up to 25% for production over 100,000 BOPD from the Contract Area. The Contractor will pay a corporate tax in Ethiopia on its taxable income fixed at 30% for the term of the PSA. The Government is also entitled to production bonuses and reserves the right to acquire up to a 5.0% participating interest in each Development Area. Pinewood’s exploration plan for the Gambela Concession is to cover the most attractive areas of the basin with seismic next season, and then bring in a drilling rig and test the best looking seismic features for oil the following season. Pinewood’s exploration program will be coordinated by Ian D.R. Neilson, M.Sc., P.Eng., President and CEO of Gambela Petroleum Corporation, and the company’s Calgary based Exploration Consultant, Mr. Ernie Pratt, M.Sc., P. Geol. The Contractor has agreed to give preference to the employment of qualified and experienced Ethiopian nationals to the fullest extent possible. To that end, the Contractor has agreed to establish an approved training and employment program and contribute US $60,000 during each year of the Exploration Period including extensions thereof, and US $90,000 during each year of the Development and Production Periods. In order to finance Gambela’s commitments under the terms of the PSA, Pinewood intends to enter into a working interest or equity partnership agreement. Posted: Sun Jan 19, 2003 10:14 am Post subject: -------------------------------------------------------------------------------- Ethiopia: Oil And Gas IndustryExcerpts:Recent assessment of the hydrocarbon potential of Ogaden Basin was included in the study made by Alconsult International Ltd. on behalf of the Canadian International Development Agency (CIDA). The study is part of a larger study, the East Africa Regional Hydrocarbon Study which involves the participation of Ethiopia, Kenya, Madagascar, Mauritius, Mozambique, Seychelles, South Africa and Tanzania. The assessment proved that the Ogaden basin is a reasonably prospective area for petroleum resources.
Ethiopia: Oil And Gas IndustryOverview Ethiopia is endowed with energy resources such as coal, biomass, solar energy and natural gas and is not a great consumer of petroleum fuels. Current natural gas reserves are estimated to be 24 million cubic metres. 95% of the energy consumed in Ethiopia is derived from traditional energy resources. The balance is made up of electricity and oil products. Less than 4% of the population, however, is supplied with electricity. Consumption of liquid fuel products, in 1997, according to the US Department of Energy was approximately 550 000 metric tons. The industry is regulated by the Ministry of Mines and Energy. The Ethiopian National Committee (ENEC) was established to deal with issues related to the energy sector and to assist in policy making and setting of priorities. ENEC operates through the Ministry of Mines and Energy as a planning secretariat. Energy parastatals and the agencies established for geothermal and petroleum exploration report to the Permanent Secretary of the Ministry or to the Minister directly. His Excellency, Izaddin Ali Zikeh is presently the Minister of Mines and Energy. Petroleum legislation was promulgated in 1986. Upstream The resource potential of petroleum and other types of energy appears to be highly promising. The Ethiopian government has selected potential petroleum development areas and these have been made open for private investment. In these areas, some geological exploration has been carried out and there are indications of the occurrence of oil and gas. In 1974 Tenneco made a discovery in the Ogaden region of Ethiopia with estimated reserves of 2.4 billion cubic feet of natural gas. Recent assessment of the hydrocarbon potential of Ogaden Basin was included in the study made by Alconsult International Ltd. on behalf of the Canadian International Development Agency (CIDA). The study is part of a larger study, the East Africa Regional Hydrocarbon Study which involves the participation of Ethiopia, Kenya, Madagascar, Mauritius, Mozambique, Seychelles, South Africa and Tanzania. The assessment proved that the Ogaden basin is a reasonably prospective area for petroleum resources. This, the largest sedimentary basin, contains a commercial discovery in the form of a gas condensate field, the Calub Gas Field and is situated in the eastern part of the country. The basin has an area of 350,000 square kilometres and sedimentary thickness of up to 10,000 meters. The reserve potential of Calub gas field is proved to be 2.7 TCF and this resource is under development for production. In order to exploit these reserves, the Ethiopian government established the Calub Gas Share Company (CGSC) with, initially, a large part of the share belonging to the government. Now with its serious interest in involving private investment in all economic sectors in the country, the government has decided to privatize 100 percent of its share and actions are being taken towards this end. In fact, it has been reported that, in December 1999, the government of Ethiopia and Sicor of Texas, signed a preliminary agreement for a venture to produce natural gas and associated liquids. The project will be known as the Gazoil Ethiopia Project ("GEP"), and involves the acquisition by GEP of two concessions in the Calub and Hilala areas of the Ogaden basin, containing 4 trillion cubic feet of gas and 13.6 million barrels of associated liquids. GEP will also reportedly acquired approximately 95% of the Calub Gas Share Company ("CGSC"). GEP will also construct a 600-kilometer, 24-inch gas pipeline to transmit gas and associated liquids to Awash, a town 220 kilometres east of Addis Ababa.
Also in the Ogaden Basin, Ethiopia Hunt Oil, the local branch of the Canadian
international, Hunt Oil Company, acquired the rights to the Genale River
concession which borders Somalia and Kenya in 1989.
Oil and Gas Energy
The Ogaden Basin is one of the laraest sedimentary basins in Ethiopia, The total area of the basin is estimated to be 350,000 square km. This size coupled with its hydrocarbon potential makes the basin economically interesting in Ethiopia.
There are 14 blocks within the Ogaden basin, which are open for interested international oil companies. The ministry of mines and energy is undertaking continuous promotional work to develop the petroleum reserve of the region.
It is estimated that 68 billion metric cube of natural gas deposit is available in Kalub. Gas fuel and similar resource has also been discovered in Elele areas near Kalub gas fuel. Oil and gas energy potential are also reported to exist in other parts of the basin region.
Petroleum exploration activity in the Ogaden Basin was carried out by a number of oil companies during the last 50 years. To date a total of 46 : wells have been drilled of which 22 are exploratory, 15 are stratigraphic and 9 are development wells of the Kalub gas condensate field.
The Kalub gas field is approximately located 1,200 km south of the region's capital, Jijiga. The reserves are estimated at 2.7 TCF (76BM3). The reserves have been appraised and are found to be commercially important,Currently the completion of wells and other related activities for its development is underway and is expected : to soon be completed. The Kalub Gas Share Company: (CGSC) was established to undertake the Development of the gas field. The completion of digging wells is underway for production on condensate and other activities such as non- associated gas for fertilizer and power production.
It is worthwhile to note that a meaningful gas development depends on reliable gas resource for future years to come. In this respect, the discovery of Hilala gas and oil pool near the Kalub gas condensate field enhances prospectivity of the region attractive for investors, who will be involved in the gas industry.
Ethiopia's Economic Climate Sector Policies And Strategies: Petroleum Resources The four potential areas for petroleum resources are classified in their respective occurrence basins; the Ogaden, Mekelle, Abbay and Gambella Basins. Out of these, the Ogaden Basin has been extensively explored by the government and international oil companies. The Ogaden is the location of Ethiopia's largest gas condensate development, the Calub field. The policy and strategy towards the petroleum sub-sector is similar to that of the mineral sub-sector. The sub-sector is expected to be developed by international oil companies allocating risk capital for the exploration and development of petroleum resources.
THE PETROLEUM SUB-SECTOREthiopian Petroleum Potential The sedimentary regions of Ethiopia cover a significant portion of the country and comprise five distinct sedimentary basins, namely the Ogaden, Blue Nile, Mikele, Gambella and Southern Rift basins. Generally about 40% of the country is covered by sedimentary rocks of Permo-Triassic continental to deep marine sediments and Cretaceous rift sediments and these are prospective for petroleum resources.
Current Petroleum Exploration and Development Activities :
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