Wednesday, March 13, 2013

Ethiopia: A Potentially Golden Block on East Africa’s Tertiary Rift

Get ready for the first-ever exploration in Ethiopia’s Omo region—and it could be VERY BIG. After all, it’s an extension of the massive finds in Kenya.
Ethiopia has the misfortune of being entirely landlocked as a result of the 30-year war with neighboring Eritrea. Still, oil and gas exploration here is advancing must faster. It has less potential—and no offshore prospects—which should make it less attractive than Eritrea, but foreign oil and gas companies favor it nonetheless.
In late February, UK-based Tullow Oil Plc (TLW)—the same company behind the massive discovery in Kenya in early 2012—announced it would finish drilling its first well in western Ethiopia’s South Omo Block by the end of this quarter. The foray into Ethiopia was based on geography. This block is considered an extension of Tullow’s Kenya concessions and it all is part of East Africa’s Tertiary Rift (which includes Uganda). If they find oil in this well it would be the first discovery in Ethiopia. The well (Sabisa) belongs to Tullow, Africa Oil Corp. (AOI) and Marathon Oil Corp. (MRO).
There have already been some gas discoveries in eastern Ethiopia, but the target here is potential oil in the country’s west—as part of the same oil system found in Kenya. What are the chances of striking oil at Sabisa? Well, the explorers say the structure is virtually identical to the structure of the Ngamia well, the site of Tullow’s massive find in Kenya. According to Tullow, Sabisa is targeting some 140 million barrels of oil resources.

The terms would be fairly attractive, with the Ethiopian state taking 10% of any discovery. Tullow and partners plan to build a total of 11 wells in what is labeled the Kenya-Ethiopia Frontier Basin. Three of those wells will be in Ethiopia.
Ethiopia also has an estimated 3.89 billion tons of oil shale (enough to produce about one trillion barrels of oil, roughly) in Tigray State, on the border with Eritrea. It is also believed to have around 100-120 million tons of oil shale in the Delbi.
Ethiopia has also recently build its first drone, which could be used for surveying oil and gas prospects (not to mention the military applications for monitoring the insecure borders with Eritrea, Somalia, Kenya and South Sudan). 
Another reason Ethiopia has been favored by foreign investors—aside from its geological connection to Kenyan oil and gas prospects—is its security partnership with the US, both in regards to Somalia and Yemen. And this is something that Eritrea eyes warily.
By. Analysts