Ministry of Mines Signs Agreement with Chinese Firm for Ogaden Gas Reserves

The Ministry of Mines (MoM) signed a petroleum production sharing agreement (PPSA) on November 16, 2013, with Chinese firm Poly GCL Petroleum Investment Ltd, for the Ogaden basin’s Calub & Hilala gas reserves, Fortune learnt.

The area, which was first identified as a potential natural gas reserve in the 1930s, has repeatedly attracted the attention of foreign investment, but nothing has been realised thus far.

About a dozen companies have obtained licences for the fields after the presence of gas was confirmed in 1972 by Tenneco – aUScompany. This has created an extensive collection of seismic and other data on the area, which is estimated to hold 76 million cubic metres of natural gas.

The companies that have gathered the information include Malaysia-based Petronas Carigali, Soviet Petroleum Exploration (SPE), Hong Kong-based PetroTrans and Chinese company Zhoungyan Petroleum Exploration Bureau (ZPEB). The latter drilled eight wells in two different sites in order to ready them for exploitation.

The exit of Petronas in 2010 was followed by an international tender in March 2011, which was won by PetroTrans after it agreed to invest close to four billion dollars to develop the gas fields. It won after beating six other bidders, including South West Energy (SWE), the National Oil Company (NOC) ofEthiopia- largely owned by Mohammed Ali Al-Amoudi (Sheikh) – and Cobramar of Seychelles.

PetroTrans then signed a PPSA agreement with the Ministry in July 2011, but the deal was terminated by the Ministry exactly a year later. This was because the company reportedly did not undertake any field works as was required according to the agreement. This created a dispute with the company, which claimed that it was analysing and interpreting old data collected from the concessions.

Since the new agreement comes against the backdrop of numerous unsuccessful precedents, the Ministry will heavily follow-up on the investment by the latest company to show interest, according to Tolosa Shagi, the state minster of Mining.

“The area has not been productive,” he said. “The government wants to see something concrete in the area, so the Ministry will be keeping a close eye on it,” Tolossa told Fortune.






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