SouthWest Energy of Ethiopia Optimistic on Oil Search in Ogaden

SouthWest Energy, an Ethiopian oil- exploration company, said it’s optimistic about the results of a seismic survey in the Ogaden basin and has met oil majors to discuss a possible partnership in the Horn of Africa country.

The initial findings from the survey completed in February are “very encouraging,” Chairman Tewodros Ashenafi said in an interview on May 7 in the capital, Addis Ababa. “Discovery could very well possibly happen next year.”

Infrastructure needed for production, which would start at least four years after any discovery, may cost as much as $3 billion, according to Tewodros. “That can only be done by the big boys,” he said, without providing further details.

No oil has been found in Ethiopia, which relies on exports of coffee and other agricultural commodities to generate most of its foreign-exchange earnings. The Somalia-bordering Ogaden region, where PetroTrans Co. of Hong Kong operates the Calub and Hilala fields, has 4 trillion cubic feet (113 billion cubic meters) of natural gas, said Tewodros, who is in the Ethiopian capital to attend the World Economic Forum on Africa that begins today.

Tullow Oil Plc (TLW), based in London, and Canada’s Africa Oil Corp., in March announced they struck oil in Turkana, a northern region in neighboring Kenya. The companies hired China’s BGP Inc. to survey similar terrain across the border in Ethiopia’s South Omo Block.

SouthWest, based in Addis Ababa and registered in Hong Kong, is also prospecting in Ethiopia’s southwestern Gambella region. The 17,000 square-kilometer (6,564 square-miles) concession is “exactly the same” as South Sudan’s oil-rich Muglad Basin, said Tewodros. Muglad contains an estimated 6 billion barrels of oil in place, according to a 2010 report by FirstEnergy Capital Corp. in Calgary, Canada.

Billions of Barrels

“I think two to three billion barrels of proven reserves is not something that is unreasonable” for the sites being prospected in the Ogaden, Omo and Gambella, he said.

The company has invested about $50 million in Ogaden blocks 9, 9A and 13, which cover 29,000 square kilometers, and plans to commit a further $150 million over the next three years, Tewodros said. Drilling is expected to start in the first quarter of next year, he said.

The banned Ogaden National Liberation Front has waged a 28- year campaign for self-determination in the Ogaden, which is populated mainly by ethnic Somalis. In September, the rebel fighters said they attacked a PetroTrans convoy, while the company denied the incident. In April 2007, the rebel group attacked an exploration site operated by China’s Zhongyuan Petroleum Exploration Bureau, killing nine Chinese workers and 65 Ethiopians.

‘Challenges’

While security “challenges” exist, SouthWest spent 1 million man hours during eight months of surveying without “a single major accident or injury,” Tewodros said.

Oil produced in the Ogaden would probably be exported via a pipeline to the coast of Somaliland, an autonomous northern region of Somalia, which is as close as 120 kilometers (75 miles) from the blocks, he said.

Ogaden oil may be light in sulfur and “easier to refine,” while Gambella’s could be “waxy” and need chemicals “to have it flow,” according to Tewodros.

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

To contact the editor responsible for this story: Paul Richardson in Nairobi at pmrichardson@bloomberg.net.

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