Ethiopia Rebels Say Petronas Concession Sale Shows State's Lack of Control

A rebel group operating in Ethiopia said the sale by Malaysia’s Petroliam Nasional Bhd. of energy concessions in the country showed the government’s lack of control of the restive eastern region.

SouthWest Energy (H.K.) Ltd., which according to its website is an Ethiopian-owned company based in Hong Kong, said on Oct. 6 it acquired all of Petronas’s interests in the Ogaden basin, which has proven gas reserves of as much as 4 trillion cubic feet. Owners of SouthWest include members of the Tigrayan People’s Liberation Front, one of the main factions in Ethiopia’s ruling party, the renegade Ogaden National Liberation Front said in an e-mailed statement on Oct. 8.

The government has been “forced to hide behind its own company” because of its lack of control of the ethnic-Somali region, the ONLF said.

Ethiopia’s government denied the company is owned by members of the ruling party. “The ONLF’s assertions are false,” Adam Goldberg, spokesman for SouthWest Energy, said in an e- mailed response to questions. “SouthWest Energy has U.S., U.K. and other Western investors, and the TPLF has no ownership stake or any other association with SouthWest Energy.”

Ethnic Somali rebels from the ONLF are seeking independence for Ethiopia’s Ogaden region, an arid area twice the size of England largely inhabited by nomads. In April 2007, the group attacked an exploration site in the Ogaden operated by China’s Zhongyuan Petroleum Exploration Bureau, killing nine Chinese workers and 65 Ethiopians.

Counterinsurgency

The attack triggered a counterinsurgency campaign by the Ethiopian army in the second half of 2007. Ethiopia considers the ONLF a terrorist organization backed by neighboring Eritrea.

“SouthWest Energy believes that its investments in the Somali region of Ethiopia are the best solution for the region’s sustainable development, and it will continue to closely consult with clan elders and community leaders about the environment and other regional issues,” Goldberg said.

Both the Ethiopian government and the ONLF have previously claimed battlefield victories and accused each other of atrocities. Verification of the reports is difficult as the Ethiopian government bars foreign journalists from traveling independently in the region, much of which is under military administration.

Ethiopia “has clearly weakened, if not defeated the insurgency” in the area, judging by the lack of major incidents since the 2007 attack, J. Peter Pham, senior vice president on the National Committee on American Foreign Policy, said in an e- mailed response to questions.

‘Window of Opportunity’

The ONLF’s “degraded” operational capacity is a “window of opportunity” for Ethiopia to put an end to the conflict “once and for all,” Pham said. That would “open the way for the development of the natural resources,” he said.

Shimeles Kemal, a spokesman for the Ethiopian government, said the state will sign a peace agreement with a “major faction” of the ONLF led by Salahdin Maow in Addis Ababa tomorrow. The faction represents about 80 percent of the ONLF’s fighting force, he said.

The Maow group has not conducted military attacks in the Ogaden and is “largely an exile organization,” David Shinn, a former U.S. ambassador to Ethiopia, said in an e-mailed response to questions on Oct. 8.

Petronas, the state-owned oil company, said in an e-mailed statement the sale of the assets in the Ogaden is “part of our overseas E&P assets rationalization exercise, in line with our strategy to build a robust international portfolio.” It didn’t elaborate.

Ketsela Tadesse, head of petroleum licensing and administration at the Mines and Energy Ministry, said the agreement between SouthWest and Petronas has yet to be ratified by the government.

“There is a clause in the contract for the concession to be transferred, but it needs to be approved by the ministry and by high officials,” Ketsela said by phone on Oct. 8.

To contact the reporter on this story: William Davison in Addis Ababa via Johannesburg at pmrichardson@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net.

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