The Ministry of Mines and Petroleum on Wednesday announced that it has revoked the petroleum exploration and development agreement it signed with the Chinese oil company, Poly-GCL.
At a press conference held today the Minister of Mines Takele Uma disclosed that the ministry has terminated the petroleum development agreement as of yesterday. “We tried to help them. We wrote several warning letters to them. But the company is unable to execute the project,” Takele told journalists. “We found out that the company does not have the required financial and technical capability to realize the project,” the minister said.
The minister said that he had a meeting with executives of the company this morning. “We will look for companies which will develop the petroleum resources. If POLY GCL can come up with the required resources they can participate in the selection process. We have told them that,” he said.
“The company has been encountered with three major problems,” he added. The Minister attributed lack of financial, technical and production capabilities from POLY-GCL side as major reasons for the contract termination.
The Ministry of Mines has been taking punitive measures against mining and oil firms who fail to execute mining projects according to schedule. Last June the ministry revoked 972 mining licenses.
“Ethiopian government needs companies that can develop the natural resources and support them. But we do not tolerate those who keep Ethiopia’s natural resources undeveloped for a long time,” he said.
Poly-GCL Petroleum Investment Group signed a petroleum development and production sharing agreement with the Ministry of Mines in 2014. The ministry granted Poly GCL a license that enabled it to prospect for oil and gas reserves in the Ogaden basin. The ministry also granted Poly GCL the right to develop the natural gas reserves found in the Calub and Hilala localities in the Ogaden basin, in Somali Region.
The company pledged to construct a gas pipeline all the way to Djibouti and build a gas refinery plant at the Port of Djibouti. The total investment cost was estimated at 4 billion dollars. The company planned to start gas production and export in 2017. But none of the projects materialized.
However, Poly GCL under took various oil and gas exploration project in the Ogaden basin. It collected a vast seismic data and drilled exploration wells. In a locality called Dohar, the company discovered gas reserves. It also discovered some crude oil reserve near the Hilala gas field. The company started test production in 2018. However, the crude oil reserve was not commercially viable.
Poly GCL had also faced a critical financial crisis that led the oil and gas exploration and development project to a standstill.
It is to be recalled that soon after coming to power Prime Minister Abiy Ahmed (PhD) announced that Ethiopia will begin oil test production in 2018. He also said that Ethiopia would start gas export and would earn 1 billion dollars annually.
Ethiopia has a natural gas reserve of 7 Trillion Cubic Feet (TCF), according to a recent reserve conformation and feasibility study report, which was conducted by Netherland, Sewell & Associates, Inc (NSAI), US based company hired by the Ministry of Mines.
