Last Stops on the East Africa Oil & Gas Frontier: Eritrea
www.oilprice.com | December 19, 2015
Eritrea is most likely sitting on massive oil and gas reserves, but the government doesn’t seem to be too interested in exploiting them—for now. At the same time, neighboring Ethiopia is about to be put to the test in what explorers are hoping will be a first massive find in its first well in the Kenya-Ethiopia Frontier Basin. Eritrea remains enigmatic despite its potential, but in Ethiopia, there’s no mystery—it’s open for business.
ERITREA: An Enigmatic Exploration Venue
Eritrea’s natural resources—especially oil and gas—remain virtually untapped largely as a result of the 30-year war for independence with Ethiopia. While there is plenty of evidence that Eritrea holds massive oil and gas reserves, the country’s leader has kept quiet about it until recently.
Eritrea is at the southern end of the Red Sea and this is one of the few unexplored places left in the world. It has the geological features of a major hydrocarbon bonanza. While most of the potential is offshore, onshore also has potential, though minerals like gold, copper and zinc are bigger prizes than oil and gas.
The Eritrean Red Sea Basin is about 125,000 square kilometers and offers attractive potential in the pre-rift (Mesozoic), syn-rift (Miocene), and post-rift (Late Miocene to early Quaternary) sedimentary units.
Exploration has been going on—piecemeal—since 1921, but only 11 wells have ever been drilled offshore. Eight of those offshore wells have had good oil or gas shows. In the 1940s, 12 shallow holes were drilled in the offshore islands. What’s got everyone’s attention are the plentiful oil seeps on the islands of the Dahlak archipelago as well as in areas along the coast. In 1969, Mobil was drilling a gas well that caused a blow-out. The gas flowed by itself for almost two months afterwards.
So far, there have been no commercial deposits discovered offshore, but ENI (Italy), Anadarko Petroleum (US), Perenco (France), and CMS Oil and Gas (US) have all explored in the past—and then abandoned efforts. In October 2008, the government signed two agreements with the Defba Oil Share Company (a Chinese-Eritrean JV) to explore a large area near the border with Sudan. Exxon Mobil, Shell and Total are involved in the marketing and distribution of petroleum products in the country. Today, exploration of the Eritrean Red Sea is pretty much up for grabs and remains largely unexplored.
So why has there been no real surge into Eritrea? The 30-year war was a bit off-putting, and security concerns have lingered, though the situation can now be considered very stable. The earlier gas finds in Eritrea weren’t very attractive because there was no market for it at the time, but that, too, has changed.
But this is pretty much a similar story everywhere. Now, with the flurry of exploration activity in Africa—from major discoveries in Uganda and Kenya, high-level production activities in Sudan and even exploration in war-torn Somalia—Eritrea should be on everyone’s radar.
What remains problematic is the lack of infrastructure for oil and gas, but beyond this exploration has been slow because the government has until very recently chosen to more or less save its hydrocarbons for the future and instead rely on mining activities to bankroll other sectors. Post-war Eritrea has only now really begun to court foreign oil and gas companies in earnest. New technology to unlock unconventional offshore reserves, however, reignites interest in previous exploration activities.
It was only in 2010 that the government even admitted that Eritrea was a potentially oil-rich country. Now it’s actively pursuing foreign investment. In collaboration with Robertson Red Sea International Ltd., Eritrea’s Ministry of Energy and Mines has compiled all technical information of the Red Sea prospective areas in two volumes to help investors determine hydrocarbon potential.
The Ministry is also offering downstream opportunities, such as the rehabilitation of its Assab refinery, the construction of a new refinery, oil and gas distribution licenses and more. Eritrea will end up being the last stop on the East African frontier—once everything else is explored, the Red Sea will spark renewed interest.
Are oil interests at the heart of the EU's €200m (£145m) aid package to Eritrea?
www.theguardian.com | December 19, 2015
New research shows that Eritrea’s Red Sea coast has “massive oil and gas reserves”, but the endless conflict with Ethiopia and the isolation of the Afwerki government have left the country’s natural resources largely untouched.
That may well be why, for example, the former UK Conservative leader Michael Howard led a group of British businessmen to seek investment opportunities in Eritrea’s hydrocarbon sector in March 2014. Lord Howard is chairman of Soma Oil and Gas , a company that has been accused of bribing Somali officials to obtain a licence to explore and extract oil offshore.
In February 2015, Eritrean officials attended the Red Sea Oil and Gas summit in Dubai, where they said they were prioritising the petroleum sector as part of the country’s economic development, promising incentives to foreign oil companies.
Even more evident are the interests of Italy in Eritrea. The country is a former Italian colony and currently a major business partner.
Last year, Lapo Pistelli, the vice-minister of foreign affairs, was criticised by human rights groups for shaking hands with Afwerki during a visit to Asmara. He claimed he was going to start new bilateral relations and bring Eritrea back to the international community “as a responsible and indispensable actor to stabilise the region”.
A few months later, Pistelli played a decisive role in involving the Eritrean government in the Khartoum process, an EU-African Union initiative aimed at tackling the trafficking of migrants between the Horn of Africa and Europe.
In June this year, Pistelli became vice-president of Italy’s oil giant ENI, already active in 15 African countries. The decision was opposed by some left-wing MPs, who accused him of a conflict of interest and suggested he might have planned the move while still in political office.