Government agrees to plans for the exploration of Rift Valley block
Africa Oil Corporation has completed an airborne gravity and magnetic survey, the required initial survey for the exploration of petroleum, on the Rift Valley Block of South-Western Ethiopia, three weeks ago. The survey was completed by a South African contractor, New Resolution Geo physics (NGR), and it took around three weeks to complete.
A Canadian oil and gas exploration company, Africa Oil, entered into a contract for a joint study with the Ministry of Mines (MoM) to study the Rift Valley Block, which spans 42,519 square kilo meters, at a cost of 125,000 dollars, on November, 2010. The company has an interest in acquiring exploration licenses in several African states including Kenya, Mali, and Somalia, as well as Ethiopia.
It is only after assessing the minimum exploration work, economic benefits to the country in terms of oil profit sharing, and the company’s proposal that the MoM will accept a company’s application for exploration, according to MoM’s Petroleum Operation Proclamation. A successful applicant will conclude a joint study agreement to study the specific block that the applicant applies for, this study usually takes a year and a half to complete. The study involves analyzing the geology of the area by taking satellite images, and studying the local vegetation and geology to decide if the area has a potential for petroleum or not.
Its when the company believes that it is profitable to engage in exploration and indicates the specific area for exploration, that the MoM will conclude a Production Sharing Agreement (PSA). A total of eight international companies have shown an interest for exploration in Ethiopia since 2005, of which seven have signed the PSA, and one [Africa Oil Corporation] has signed a joint study agreement. However, Africa Oil Corporation has also signed a PSA jointly with Tullo Petroleum and White Nile Petroleum, both UK based companies, to explore the South Omo Valley block, with Tullo Petroleum as the operator by virtue of having the largest share.
Other companies that have signed PSAs include Pexco Exploration a Malaysian based company, which acquired licenses to undertake petroleum exploration in the Ogaden block and Gambela Basin respectively. South West Energy, a Hong Kong registered company, and Afar Exploration, a US registered company, also received a license for exploration in the Afar and Ogaden regions respectively.
Epgilon Company has taken 83,000 sq km, the largest block taken for exploration out of the eight. The remaining blocks are being explored by Calvally Petroleum and Falcon Petroleum. However, on January, 2011, Petronas decided to abandon its oil exploration activities in Ethiopia after spending around 350 million dollars during its seven years of operations in the area. Following its closure, Petronas was trying to transfer all of its exploration activities to South West Petroleum Company, but the deal was not accepted by the Ethiopian government and the blocks were returned to the government.
“It’s because the company has undergone a change of management that it decided to concentrate on its own country. Therefore, it has suspended its projects all over the world, not only Ethiopia,” Ketsela Tadesse (PhD), MoM’s Petroleum Licensing