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BusinessBritish mining firm decides to pull out of Ethiopia

British mining firm decides to pull out of Ethiopia

Ministry revokes African Mining and Energy license

The British mining firm, NewAge has pulled-out of Ethiopia after the Ministry of Mines rejected the company’s request to extend its license. 

The company’s license, acquired in 2007 to develop the natural gas and petroleum found in the Ogaden Basin in Somali region, expired in August 2021. 

The British mining firm repeatedly asked the Ministry of for an extension of the license, citing COVID 19 pandemic as Force Majeure. Officials of the Ministry rejected its request. 

“We are disappointed by the decision of the Ministry of Mines not to extend the Block 8 PPSA beyond August 5, 2021 given the longstanding positive relationship we have developed with you over the years,” vice president of the company, David Peel, said in his letter sent to the Ministry on January 28, 2022.

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In a letter sent to the company, the Minister of Mines, Takele Uma said that the Ministry has reviewed NewAge’s performance and based on the evaluation, the company has shown little to no effort to develop and produce the block it acquired in 2007.

 “The overall evaluation has shown that the oil and gas resources have remained under developed for far too long under your license agreement. Therefore, after serious considerations, the Ministry has decided to respectfully decline your request to extend the Petroleum Production Sharing Agreement (PPSA) that was signed in July 2007,” the letter seen by The Reporter reads.

Although the company insisted to extend the application of the Force Majeure due to COVID 19 for an unlimited period, the Ministry is not convinced and hence, declined the company’s request for another round of extension, Takele said in his letter sent to the company on January 4, 2022.  

According to his letter, the PPSA license granted to the company, expired on August 5, 2021, after it exhausted the one-year Force Majeure granted to the company.

NewAge however, contends that the COVID 19 pandemic is still a Force Majeure event that has hindered the gas production in its block in Somali Region of Ethiopia.    

“As we have set out in our previous communications, it is our understanding that the continuance of a force majeure event shall not result in the termination or expiry of the PPSA for so long as the Force Majeure continues,” David Peel said in a letter sent to the Ministry on January 28, 2022.

The company accepted the decision and agreed to surrender the license and decided to entirely pull out of Ethiopia.    

“We concluded the petroleum operation in Ethiopia and the office in Addis Ababa and our associated bank accounts will be closed. Accordingly, NewAge will have no obligations in Ethiopia and under the Block 8 PPSA,” David Peel said in his letter to the Ministry.

The Ministry also revoked a potash mining license granted to Africa Mining and Energy, an Australian based mining company operating in Ethiopia.

In a letter sent to the company on February 1, 2022, the Ministry revoked the license due to lack of progress in the company’s mining operations.

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