Ethiopia starts oil production from Ogaden Basin
Industry Resources

Ethiopia starts oil production from Ogaden Basin

ADDIS ABABA, Ethiopia- Chinese state-owned enterprise Poly Group is working with another Chinese company, Golden Concord Group, to develop oil and gas projects in Ethiopia.

The conglomerate, named POLY-GCL, began extracting from the Ogaden Basin, located on Somalia’s border, this May. Construction of a 550km pipeline pumping gas to the Port of Djibouti is underway, and substantial exportation is set to begin in 2021.

The total cost of this development project is estimated at $4 billion dollars. Other companies exploring for oil and gas in Ethiopia are Southwest Energy, Africa Oil Corp, GBP Global Resources and Gazprombank Group.

POLY-GCL signed five agreements with Ethiopia’s Ministry of Mines in 2013 to explore 117,151 square-kilometres of the Ogaden basin. At least 4.5 trillion cubic feet (ft3) of gas has been discovered.

Once fully operational, 3 million ft3 of LNG (liquid natural gas) is planned for exportation in year one and 6 million ft3 in year two. Black Rhino Group has invested $300 million already in the pipeline running from Ethiopia to the shores of Djibouti.

Currently, oil is transported via truck between Addis Ababa and the city of Djibouti for both import and export demands but the pipeline is set to change all that. Turner and Townsend have won a contract to manage its construction. The company are based in Leeds and specialise in natural resource sectors.

Ethiopia starts oil production from Ogaden Basin
Currently, oil is transported via truck between Addis Ababa and the city of Djibouti for both import and export demands but the pipeline is set to change all that.

POLY-GCL have begun work in three areas of the Hilala and Calub localities of Ogaden. The Calub field is estimated to hold 2.7 Trillion ft3 of natural gas. Half of the refinery’s output will be directed to the Ethiopian market and the remainder exported to neighbouring countries in East Africa. POLY-GCL have organized the basin area into ten blocks – 2 under development and 8 under exploration.

Natural gas and condensate oil are the main products while there is also crude oil in some reservoirs. Other than Ogaden, Ethiopia has 4 sedimentary basins elsewhere – Gambela (in the west), Mekele (in the north), Southern Rift (in the south) and Abay (in the central west).

Zhu Gong Shan, also known as China’s greenest billionaire is CEO of POLY-GCL. The company has 192 employees and place a strong emphasis on providing people with efficient and clean energy services. By exporting gas from Africa they hope to solve air pollution in China, a country of 1,379 billion people. Initial production has begun in Ethiopia but only on a small scale. 450 barrels a day are supplying the gas condensate for local manufacturers and cement factories. Eight gas production wells have been drilled and made ready for production.

Ethiopia has now joined Kenya and Uganda as the only three serious oil-producing nations in East Africa. Sudan, in the north-east, is the seventh largest operator on the continent producing around 487,000 barrels a day, but due to political tensions hasn’t been able to fully tap into the industry. Nigeria is top of the list in Africa and very popular with European and US refiners. Other countries in East Africa with fresh oil and gas finds are Uganda and Tanzania – although exporting has not begun here.

In its ambition to become a middle-income nation by 2025, Ethiopia is aggressively developing power supply capabilities in all areas.

Russian company Rosatom Africa recently began the construction of a nuclear research centre and two huge hydropower dams are nearing completion. Renewable energy is a priority to the government for obvious reasons but oil and gas has a realistic potential to supply the hard currency this country needs.

LNG from Ethiopia will be shipped to China via a dedicated terminal in Djibouti. Carriers with cargo tank capacity of 177,000 m3 (cubic meters) are mostly being adopted. Once gas reaches the port it will be processed and liquefied there before shipping.

Initial development of the LNG plant in Djibouti occupies an area of approximately 50 hectares. Its main processing and auxiliary facilities include a feed gas pre-treatment unit, liquefaction unit, LNG storage, transmission system, production and administration buildings.

POLY-GCL is working closely with Ethiopia’s Ministry of Mines. This is a good thing as oil and gas can have positive or negative effects on a country that has it, depending on how revenues are handled. President Abiy Ahmed insists profits will go back into improving services for the people of Ethiopia.

The role of the Ministry is mainly to generate the basic geosciences data of the country, to promote mineral and petroleum potential, to negotiate and issue licenses to private investors and ensure they conduct mineral and petroleum operations in accordance with their concession agreements. Hopefully, this new development will not only bring profit to POLY-GCL and reduce emissions in China but also go a long way to developing Ethiopia into the middle-income country it wishes to be.

By Ruari Phillips