Skip to main content
x

Poly GCL negotiates on government’s stake on gas project

The Chinese company, which is in the process of developing the natural gas fields in the Ogaden basin, Somali Regional State, Poly GCL Petroleum Investment, is negotiating with the Ethiopian Minerals, Petroleum and Bio Fuel Corporation on the government’s interest in the gas development project.

The Ethiopian government has a 15 percent stake on the four billion dollars Calub and Hilala gas fields development project. The government has delegated the Ethiopian Minerals, Petroleum and Bio Fuel Corporation to represent the government’s interest in the gas development project.

Sources told The Reporter that executives of Poly GCL and the corporation started the negotiation two weeks ago in Addis Ababa. Sources said the parties have initiated talks on the modalities that they could work together. “Poly GCL is the operator while the Ethiopian Minerals, Petroleum and Bio Fuel Corporation would be a partner that will follow up the government’s 15 percent interest in the gas project,” sources said.

According to sources, executives of Poly GCL and the corporation are now meeting every two days and deliberating on the draft collaboration agreement. “It is not going to be a joint venture company but Poly GCL will be the sole operator while the corporation is delegated to ensure the fair share of the government coming from the project,” they said.

Poly GCL Petroleum Investment has been trying to develop the natural gas reserves in the Calub, Hilala and Genale gas fields. It has also been prospecting for additional gas and oil reserves in its license area measuring 93,000sqkm of land in the arid region of the Ogaden basin since 2014. The gas reserve is estimated at eight trillion cubic feet.   

When Poly-GCL signed the petroleum development agreement in 2013 with the then Ministry of Mines it agreed to pay USD 100 million to the Ethiopian government for the Calub and Hilala gas fields. Based on the production sharing agreement, the Ethiopian government will have a 15 percent share while Poly-GCL will have a majority 85 percent. In addition to its share on the product, the government is entitled to income tax, royalty and land rent fees.

The Council of Ministers established the Ethiopian Minerals, Petroleum and Bio-Fuel Corporation with an authorized capital of 15 billion birr in 2016. The giant corporation comprises three divisions – petroleum, mining and bio-fuel developments. The petroleum division is engaged in the exploration, development and trade of petroleum products. The minerals division prospects for minerals develop and market precious metals, industrial minerals and gemstones. The bio-fuel division is in the process to venture into the cultivation of plants and production of bio-fuel products.

Poly GCL has prepared and summited a gas development plan to the Ministry of Mines and Petroleum that will enable it to develop the proven gas reserves in Calub, and Hilala localities. According to the development plan the Chinese firm will construct a gas pipeline from the gas fields all the way to Djibouti port where it will build a gas treatment plant. The gas treatment plant will convert the gas into LNG (Liquefied Natural Gas) and Poly GCL plans to export the LNG to China with especial LNG vessels.

The total gas development project is estimated to cost four billion dollars. The Ministry expects Poly GCL to start the gas export by 2021. However, the construction of the pipeline, which was supposed to commence last September, has not yet started. 

It is to be recalled that Poly GCL has discovered crude oil reserve in the three wells it drilled in the Hilala locality. The company launched test production in June 2018.

The Ethiopian government and Poly GCL have agreed to share the revenue generated from the disposal of crude oil. There was a plan to produce 450 barrels of oil daily. According to sources, the three wells could not produce more than 150 barrels per day. Poly GCL has started supplying the crude oil. However, after delivering the product to a glass factory for a short period of time, the company was forced to halt production after it was told by the Ministry of Trade that it did not have a trade license that enables it to sell petroleum products locally.