Written by Brian Burrell - Horizon Ethiopia Staff Writer
Tuesday, 13 January 2009
Globally, oil has captured the headlines and created panics ranging from alarmst $200 a barrel predictions to production cuts with plummeting prices. Drilling giants are venturing further offshore to exploit once unprofitable reserves and green energy is on the minds of many for economic reasons too.
Locally, the Ethiopian government seems to have exhausted its ability to and then discontinued subsidized fossil fuel imports leaving many wandering how they will cope with kerosene 50% more expensive. All this and you would think there would be a huge rush to develop the oil potential within the country. But strangely, drilling domestically for oil is not the talk of the town or of the local media.
An inquiry into why this is will probably leave you more confused than when you started. Most people, including officials, will tell you Ethiopia probably has oil though reserves are not proven. The perception that oil lies under Ethiopia’s 1.12 million square kilometers has existed since US-based Standard Oil Company carried geological surveys of the Ogaden basin in the 1920’s. A flurry of signings within the last couple of years means total dependence on foreign oil and uncertainty on the issue may soon come to an end.
RISING STAKES
Like everywhere else, a higher price means companies are more likely to take on risks, political or economic, to get at the black gold. Technology development is proceeding at a breakneck pace and rigs are poised for some of the most remote areas in the world.
Mammoth companies have entered the Ethiopian market: Malaysia’s Petronas, which is in the top 100 companies in the world by market capitalization, has been exploring in Gambela for four years and Titan Resources Corp., owned by U.S. billionaire Nelson Bunker Hunt, is reportedly ready to pour $60 million in Ogaden and Blue Nile basins exploration. Moreover, new areas (past the famous Gambela and Ogaden regions) are now sought after: UK’s White Nile is exploring the Southern Rift Basin in the Oromia and Southern regional states. Hardly any of Ethiopia’s regions are absent interest for oil.
Last year’s terrible attack in an Ogaden oil field in which 65 Ethiopians and nine Chinese lost their lives demonstrates both businesses’ willingness to take on greater risk with associated larger profit opportunities and the degree to which parties from all sides value the resources at all costs. But such tragedies have not been enough to dissuade big business that Ethiopia, and in fact much of Africa, is one of the few remaining frontiers with a lot of unexploited potential.
PROMISING NEIGHBORHOOD
Indeed, the Ministry of Mines and Energy has been kept busy inking deals for blocks across the country and lately even into some of the remotest areas of the Afar Region. Neighborhood experiences seem to suggest these will pay off. Sudan has been awash with oil revenues for years now and the semi-autonomous south (geographically much closer to Ethiopia) looks poised to get in on the action. Even Eritrea and Somaliland have received their share of interest from business willing to deal with geopolitical risk.
In general, Africa seems to be the hotspot for rising oil revenues stemming from new developments in previously unexploited areas. The impressive economic growth the continent has touted is in large part due to the big players in the oil market. Though Ethiopia’s impressive double-digit GDP growth figures put it in the company of oil exporting Sudan and Equatorial Guinea even without exploiting the resource it probably will not reach the level of continent-leading Angola (over 20%) until it begins to pump like this southern nation.
NOT JUST HOT AIR
While we must wait to see what comes out of all this oil attention, natural gas is a real thing for Ethiopia. Though the amounts are small on an international scale, the proven reserves in the Ogaden basin are further along to becoming a marketed resource. And with natural gas’ potential for cleaner energy production and application from electricity to fertilizers, this is a more tangible benefit to the country, though on a smaller scale.
