The Ministry of Mines (MoM) is to sign a Petroleum
Production Sharing Agreement with South West Energy
(SWE), an Ethiopian company registered in Hong Kong,
on concession of Gambella Basin located southwest of
Confirming that the ministry has finalized
negotiation with the company, Sinknesh Ejigu,
minister of Mines told Fortune that it will be
presented to the Council of Ministers for final
“After we get go ahead from the council, we will
officially sign an agreement,” she told Fortune.
SWE applied to the ministry to undertaking
exploration works on the Basin which covers
17,500sqm in August 2010. Since no one has applied
for the concession, the Petroleum Licensing and
Administration Department of the Ministry evaluated
the offer of SWE thorough a committee which also
negotiated the terms. The Ministry has the right to
make a direct agreement with companies if there is
only one interested party.
Gambella Basin, which is a south eastern extension
of Melut Basin, located in South Sudan, is the only
leftover concession out of those which were under
the Malysian based Petronas Carigali. Petronas
abandoned its exploration works in Ethiopia in 2009
after it had spent 350 million dollars.
The concessions were auctioned off by the Ministry
save for the Gambella Basin. They were all acquired
by Petro Trans, a Hong Kong based Chinese company,
beating five companies including SWE. SWE’s attempt
to deal with Petronas for the transfer of its
concessions before the latter abandoned its
activities was not successful as it was not accepted
by the government.
It is after all this trial that the company applied
for the only left over concession for which the
Petronas had collected seismic data and drilled two
wells which resulted nothing. It was the only
concession that was not put on offer as not one
applied for it until South West, which also has
exploration licence in Somalia Regional State. It
has collected seismic data on a 907km long and
conducted a 1083m up hole serving study on 19 wells,
at the end of the month.
Decision to enter into an agreement with SWE was
made after the committee evaluated the company’s
financial ability, negotiated on royalty payments,
production share, training fees, and signing and
production bonuses for the past three months.
In Ethiopia a signing bonus of between 250,000
dollars and three million for each contract, 20,000
dollar a year for training fees for the duration of
exploration period and 100,000 dollar during
development phase are applicable, according to a
study conducted by Wood Mackenzie published in 2010.
There are a number of international companies, which
have entered into agreement of Petroleum Production
Sharing Agreement (PPSA) lasting up to 25 years,
undertaking petroleum exploration.
These include Pexico Exploration, a Malaysia based
company, and Africa Oil East Africa, registered in
Netherlands, have entered a PPSA and are undertaking
petroleum exploration in south western and northern
parts Ogaden Basin. Epsilon Energy Limited and
Falcon Petroleum Limited are exploring blocks in
Northern, western and central parts of Ethiopia