Ethiopia inks agreement with Falcon Petroleum on oil production- Oil exploration in Ethiopia covers more than 70% of surface coverage
By Dereje Berhanu
ADDIS ABABA, Ethiopia- The Ethiopian Ministry of Mines and Energy on Thursday August 7, 2008 singed an agreement with Falcon Petroleum Ltd., a company registered in Cyprus on Petroleum Production Sharing Agreement. According to the agreement Falcon will initially invest USD 15 million  in a 120, 000 km2 in the Woreilu area of the Amhara Regional state of Ethiopia.
According to Mr. Radhwan Sadik Hadi, Deputy Managing Director Falcon Petroleum Ltd. the agreement allows exclusive rights in the area to undertake petroleum exploration and development. The exploration has been slated for a period of four years with possible an extension of four years and production period is scheduled in 25 years time with possible extension of 10 years.
The agreement is the first for Ethiopia as a Production Sharing Agreements (PSA) dedicated to areas other than the Ogaden Basin at large and some areas in the North Afar Rift and Omo and Chew Bahir areas in Southern Ethiopia.
Alemayhu Tegnu, Ethiopian minister for mines and energy said: “The agreement marks an extension of petroleum exploration in areas other than the historical Ogaden basin which in itself contributes to our mindset as such petroleum opportunities could exist in volcanic terrains and we will continue working in a similar manner to attract oil companies to explore in other parts of the country. To date, we have acquired an exploration agreement which collectively covers more than 70% of the surface coverage of the country, and we believe that this it is a significant success following which we foresee Ethiopia as a petroleum producing country in East Africa. We expect Falcon to start its exploration activities timely and the Ministry shall support the company to its fullest extent as per the production sharing agreement”.
According to the agreement Falcon will be fully responsible to bear all costs, necessary for all petroleum operations. Different kinds of incentives shall be given to the company among which include; tax and duties exemptions for all equipments and materials to be imported for the purpose of the petroleum exploration and development.
The agreement shall be governed and construed in accordance with the laws of Ethiopia and the company shall undertake its operations compatible with international standards and practices. As part of its commitment the company shall contribute to train Ethiopian professionals in the petroleum sector and also carry out projects for community development in the area of operation.
In the other news MOHA Soft Drink S.C. and the Ministry of Mines and Energy singed an agreement on mineral water production in the Amhara Regional State. The agreement signed between Mr. Gatacew Birbo, MOHA’s CEO and Minister Alemayehu Tegnu allows the mineral water factory to use the spring water in the area of Bure Babuna for the coming ten years. MOHA’s investment in the project is worth more than 37 million birr and is expected to create more than 200 job opportunities. According to Mr. Getachew, MOHA purchased Bura Baguna from The Ethiopian Development Bank at a cost of 27 million birr and had made an additional investment of 40 million birr to produce mineral water known as ‘Kool water’ and also to produce soft drinks at the factory.