Ethiopia on Thursday started producing crude oil on a trial basis at the Kalub and Hilala fields in the east of the country, more than four decades after it discovered crude oil and natural gas deposits, raising hopes of new income streams for its agriculture dependent economy.
The groundbreaking test-production undertaken by Chinese oil and gas exploration company Poly-GCL Petroleum Holdings Investment Ltd (POY-GCL) saw three wells at the Ogaden basin generate 150 barrels of oil of crude oil, one centrury after the Horn of Africa nation began prospecting for oil and gas reserves in the vast Ogaden Basin.
According to a communication from Ethiopian Prime Minister Abiy Ahmed’s office, an agreement with the Hong Kong-based company to begin the trial extractions on the wells in the Ogaden was reached during a meeting between Poly-GCL and Ethiopian state officials on Wednesday.
“Prime Minister Abiy Ahmed met today with the representatives of Poly-GCL Petroleum Investment Ltd to officially kickstart crude oil production testing in Ogaden Region,” Fitsum Arega the PM’s chief of staff said in a tweet on Wednesday.
“The company has discovered that there is a prospect of commercial quantities of crude oil in the region.”
The Hong Kong stock exchange-listed firm, which signed a petroleum exploration and development agreement with the then Ethiopian Ministry of Mines in 2013, will now produce about 450 barrels of crude oil per day, as Ethiopia looks to join East Africa’s oil and gas boom.
In March, Poly-GCL, a joint venture of state-owned China POLY Group Corporation and Hong Kong-based Golden Concord Group, announced that it had discovered an undisclosed amount of oil deposits and natural gas reserves, taking the country’s total recoverable gas reserves to about 6 to 8 trillion cubic feet.
Ethiopia discovered an estimated 4.7 trillion cubic feet of gas and about 13.6 million barrels of associated liquids at the Calub and Hilala gas fields about four decades ago.
The country , however, is yet to begin exploiting these resources due to communal conflicts and lack of infrastructure.
Initially, Poly-GCL was to begin producing gas in Ethiopia in 2017 and transport it through a 700km pipeline to a gas treatment plant at the Port of Djibouti before being exported to China, but delays in developing the pipeline and treatment plant pushed the production date to 2020.
Ethiopia now says that construction of the pipeline which is part of a $4 billion project — pipeline, liquefaction plant and an export terminal — will begin in September.
According to the agreement signed between Ethiopia, Djibouti and POLY-GCL last September, the gas pipeline will transport 12 billion cubic metres of natural gas a year from Ethiopia to Djibouti every year.
This translates into export 10 million cubic metres of liquefied natural gas to China annually, earning the country about $1.5 billion every year.
The commencement of crude oil production in Ethiopia is already raising hopes that the East African region will soon begin oil-driven economic transformation.
Earlier this month, Kenya began hauling its crude oil — discovered six years in the South Lokichar Basin, in the country’s northeast — from the oilfields to the Coastal city of Mombasa in readiness for export in February next year.