Ministry of Mines, Petroleum and Natural Gas of the Federal Democratic Republic of Ethiopia

Biruk Berhanu

May , 2016

Outline of the presentation Back ground

Petroleum Licensing

Petroleum Potential

Ethiopian Gas export project

Available Opportunities

Conclusion

Background Location: Ethiopia is located in the Horn of Africa

Neighbors : Kenya, Somalia, Sudan,

South Sudan, Djibouti &Eritrea

Surface Area: 1.13 million km2

Climate: Two seasons;

Dry season:- Oct. - May

Wet season:- June - Sept

Population: > 90 million

Capital City: Addis Ababa

Economic growth: Double digit growth

for the past 10 Years.

Investment Policies Conductive investment polices are already established

for the various sectors in Ethiopia.

The Government issues licenses and administer the contracts in accordance with the agreements through the Licensing Authorities. There are three Regulatory directorates under the MoMP&NG:

I. Mineral Licensing & Administration Directorate

II. Petroleum Licensing & Administration Directorate

III. Petroleum Downstream Operations Regulatory Directorate

Petroleum Licensing Policies For a single interest- one to one negotiation can be

carried out after the proposal submission to the Minister(MoMP&NG)

If more than one company interest for a block exists, bid round will be floated.

Notice will be floated on the “ Ethiopian herald’’- the English version of the Ethiopian National News Paper.

The notice will also be floated in the Ministry’s website http://www.mom.gov.et

Licensing

Bid documents will be prepared and can be collected from the Ministry.

The notice will stay at least for 45 days

The beginning and ending dates will be specified

Evaluation will follow based on the scored cards set at the beginning

The winner will be notified officially to all bidders

Signing date will be fixed with the winner

Signing ceremony with the Minister and authorized company representative will be followed.

Licensing If there is only one interest

Negotiation will be carried out between the company team and MoMP&NG team.

When agreement is reached on various fiscal terms and articles of the PPSA, report will be submitted to the Ministers office.

The PSA will be endorsed by the Council of Ministers

The Council of Ministers, Chaired by the PM will approve the PPSA.

After the approval of the Council, the Minister and the authorized company representative will sign the agreement

Fiscal Regime The Petroleum Laws/ Proclamations

The Petroleum Operations Proclamation-295/1986

The Petroleum Income Tax Proclamation-295/1986

The Petroleum Income Tax Proclamation (amendment) -295/1986

The Proclamation to Regulate Petroleum and Petroleum Products Supply Operation

Types of Agreements Petroleum Production Sharing Agreement(PPSA)

Petroleum Development Agreements( PDA)

Joint Study Agreements ( JSA)

Fiscal Regime Exploration

Initial Exploration Period – Up to 4 years Extension – Up to 4 years – 2 extensions- 2 each year

Production – 25 Years Extension – Up to 10 years

Royalty – Negotiable Production Sharing – Negotiable All petroleum operation costs – 100% recoverable Income tax – 30% fixed Training fund – Negotiable Community Development – Negotiable Annual land rent – Negotiable Bonus( Signature/Production) - Negotiable

Contractor’s Right Duty free import of equipment

Drilling equipment

Geophysical equipment

Duty free export of equipment

Tax exemption for expatriates

100% Petroleum operations cost recovery

Build facilities required for petroleum operations

The right to assign, transfer interests under the PPSA to any affiliate or person with knowledge of the Minister.

Contractor’s Obligations Work as per the PPSA

Acquire G and G data

Complete drilling obligations

Implement EIA and HSE requirements as per the law

Fulfill Payments on time Place parental Bank Guarantee with appropriate bank

Land Rental, Training and other fees

Bank Guarantte

Discovery and appraisal

Development and production

Regional Geology

Largely extended basins

and inter related with

many East African basins

Older and recent structures

and sediments exist through

Out Ethiopia

Modern rift system – a recent

Exploration target areas

Petroleum Potential of Ethiopia

More than 30%

sedimentary cover

Known Sedimentary basins

The Ogaden Basin

The Abay/Blue Nile

The Gambela Basin

The Mekele Basin

SER and Metema Basin

Oil seeps in different parts

Oil and gas shows in many of the exploratory wells

Recently found oil stained/impregnated reservoir rocks

The Ogaden Basin

located in the southeastern region

Occupies an area of 350,000 square kilometers.

shows deposits of 4.7 TCF of LNG and 13.6 million barrels of associated liquids.

deposits discovered in the 1970s

exploration activities carried out by a number of international companies

46 wells have been drilled with numerous hydrocarbon shows and two gas/condensate discoveries, Calub and Hilala.

Recent Success

New discovery- Increased reserve

Previous discoveries- Ogaden basin

Calub – 2.7 TCF

Hilala - 1.3 TCF

El – Kuran

Several prospects and

leads are delineated

Companies are prepared

for more drilling activities

Discoveries New discoveries

Genale area – Block 4

Stratigraphic trap

New reservoir- Gumburo Sandstone

Reservoir

- Primary – Gumburo

-Seconday- Calub

-Porosity-10-14

Estimated Reserve-766BCF

New Age-El kuran(Block 8)

The Ethiopian Gas export project

funded by Chinese firm POLY-GCL Petroleum Group Holdings Ltd,

Cost estimates - US$4 billion.

Target - global market: China, Europe

It is expected to start LNG production by late 2018 at 3 million tonnes a year at first, rising to 10 million tones

The project involves:1. Development of the Calub and Hilala fields in the Ogaden Basin

• Location - Calub - located 1200 km SE of Addis AbabaHilala - 80 km further to the east.

• Output target - initial 4 bcm/y - up to 10-12 bcm/y.

• The blocks have technically recoverable reserves of more than 100 bcm of gas or 600 million barrels of oil equivalent

• POLY- GCL signed PDA in November 2013• Two appraisal wells drilled last year yielded better-than-

expected results• test production – soon• commercial production - early 2019.

2. Building a pipeline from Ethiopia to the coast of Djibouti

700 km pipeline

Capacity - up to 12 billion m3/y

framework agreement for a cross-border pipeline signed

Joint Operating Agreement with the company

POLY-GCL signed Pipeline agreements with both countries

3. An LNG plant and export terminal at Damerjog, Djibouti.

• The liquefaction plant will have capacity to produce up to 10 million t of liquefied natural gas (LNG) per year after completion of the project.

• Export terminals having an initial receiving capacity of 3 mtpaeach, rising to 10 mtpa in the future to meet any increase in the output.

• To completed in 3 years.

POLY-GCL signed a PDA with Ethiopia's MoMP&NG in November

2013 to develop the fields

started drilling Calub11 and Hilala5 appraisal wells in October 2015

prepared a gas field development plan based on the reserve estimate

searching for oil and gas in eight exploration blocks in the Ogaden area with a total area of 117,151sq.km.

acquiring 3D and 2D seismic data from its concession / 2 development blocks and 8 exploration blocks/

using two rigs to conduct drilling appraisal and exploration wells

Calub base Camp

El-Kuran Testing

Officials visiting the site

Site visit

Currently active companiesAfrica Oil Corp.

Delonex Energy

Falcon Petroleum

GazProm Bank

New Age Ethiopia

Poly- GCL

South West Energy

Tullow

Downstream More local players are increasing

• YBP

• NOC

• TAF

• DALOL

• OLWAY

• TEBARK

• GOMEJU

• YESHI

Available Opportunities

The greater

Afar Block

The Mekelle Basin

The Segen rift basin

Abay basin

The Ogaden basin

conclusion

More mapping activities were carried out and still going on

Several prospects and leads- delineated in different block

Previous and new discoveries were made

The Gas Export project will enable Ethiopia to support socio-economic development across the region.

Two drilling rigs and five seismic crews are actively working

Opportunities for investment( exploration, production and transportation) still available

Thank you