The Reporter
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.