Ethiopia to auction second crude oil production site

Even though crude oil reserve was found in Ethiopia’s Legehida and Were-Ilu weredas (districts) of Amhara Region by the British company Falcon Petroleum, the operation was halted for undisclosed reason, farmers in the area said. Now the government is set to auction the site for other interested oil and gas exploration companies.

Farmers and residents of Legehida and Were-Ilu area indicated that a few years ago they were told to prepare for relocation as oil was found in the area.

“To prepare the area for the company (Falcon), we listed the names of the farmers in the area who will be relocated. Meanwhile, the company didn’t show up after that,” one of the residents of the area told state broadcaster – ETV, which showed oil spilling on the ground surface.

“After collecting good evidences [about the presence of oil in the area], the British company has gone as far as selecting the area where it will start drilling…Meanwhile it couldn’t raise enough capital to move to the production stage,” said Dr. Kong Tutlam, State Minister of Ethiopia Ministry of Mines and Petroleum. “As a result, our agreement with the company is cancelled,” he said.

“We are now in negotiation with another company to transfer the exploration site. We are expecting the new entrant to prove its financial capacity. Once the company proved to us its financial capacity, the Council of Ministers [Federal Democratic Republic of Ethiopia] will be expected to approve for go-ahead, But until then, the site is open for auction for any company interested to do exploration I the area,” the state minister said.

If all goes well and the oil reserve in the area proved to be commercially feasible, it is going to be the second oil and gas production project for Ethiopia, next to the one found in Somali Region, which recently began test production of 450 barrels crude oil per day.

Found in Wello Amhara Region, Were-Ilu was one of the highly drought hit areas where thousands of people have died during the devastating 1980s drought and famine in Ethiopia. In addition to oil reserve, there were also reports about huge iron reserve in Amhara Region around Sekota.

There has been several oil and gas explorations for many years in Ethiopia, mainly around the Omo Valley in the Southern part of the country bordering Kenya, in the middle around the Nile Valley in Amhara Region, Gambella in Western part of the and Somali areas in the Eastern part.

Around five months ago, the Chinese company has indicated that it has started gas production in Somali Region. Unfortunately the company is forced to halt production following the clash and instability created by some youth reportedly organized by the former head of Somali Region Abdi Illey (Abdi Mohamed Omer), who is now in prison.

Even though promising results have been found in some of those areas, the government has not been transparent to the people who own the resources. One of the examples for this is the mystery about why and how it cancelled oil and gas exploration project of the Malaysian Petronas company. As a result, the two sides went into controversy a few years ago.

Ethiopia discovered an estimated 4.7 trillion cubic feet of gas and about 13.6 million barrels of associated liquids at the Calub and Hilala fields about four decades ago. The Chinese company Poly-GCL, which took over this project from Petronas, is planning to do the refining of the oil in the neighboring Djibouti after transporting it using a pipeline, which is being installed.

Initially, Poly Ethiopia Petroleum Company Limited (Poly-GCL) was to begin producing gas in Ethiopia in 2017 and transport it through a 800 kilometers pipeline to a gas treatment plant at the Port of Djibouti before being exported to China, but delays in developing the pipeline and treatment plant pushed the production date to 2020.

Ethiopia now says that construction of the pipeline which is part of a $4 billion project — pipeline, liquefaction plant and an export terminal — will begin in September.

Even though Africa is rich in natural resources from oil and gas, to diamonds and many other minerals, the people of Africa remain in abduct poverty because their leaders have failed to design and implement transparent policy that benefits the people who now the resources.

As a result, these resources have become curse to the people instead of a blessing becoming a source of conflict and war, as seen in the neighboring oil rich South Sudan and Nigeria among others. Now the question is, ‘will Ethiopia, which is focusing more on mineral, oil and gas development at the moment, do something different from its neighbors?’

Bu many consider the fact that Ethiopia delayed to focus on the natural resource development as a advantage for the country to learn from successes and failures of other countries, if they are really committed to change the lives of their poor people.