Ethiopian Government Forms Company to Develop Oil, Gas Resources

Ethiopia’s government will form the Petroleum Development Enterprise that will develop oil and gas resources in partnership with private companies, Mines Minister Sinknesh Ejigu said.

The state-owned company will “bolster and enhance development,” Sinknesh said today in a phone interview from the capital, Addis Ababa. A similar public enterprise will be set up to extract mineral resources including precious metals, tantalum and potash, she said.

Ethiopia’s government in July canceled five production- sharing agreements with PetroTrans Co. because of a lack of progress by the Hong Kong-based company. Sinknesh said last month the government may develop gas fields in the country’s eastern Somali region after cancelling its contract with PetroTrans, which it had expected to bring financing of as much as $5 billion. The company rejected the termination of its contract.

The production-sharing accords were for 10 blocks in the Ogaden area of the Somali region, which include the Calub and Hilala fields with natural gas resources estimated at 4 trillion cubic feet. SouthWest Energy, an Addis Ababa-based company, has said it hopes to strike oil in the Ogaden next year.

Landlocked Ethiopia, Africa’s second-most populous nation, produces no oil or gas and was reliant on gold, coffee and other agricultural commodities for export earnings of $3.2 billion last year, according to Access Capital, an Addis Ababa-based research company.

The “whole idea” of the enterprise is to work with industry, Sinknesh said. “The private sector is the engine of development, provided they are developmental.”

The establishment of the state-owned company has been delayed by the death of Prime Minister Meles Zenawi last month, she said.

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: Antony Sguazzin at asguazzin@bloomberg.net.

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