Ethiopia is endowed with energy resources such as coal, biomass, solar energy and natural gas and is not a great consumer of petroleum fuels. Current natural gas reserves are estimated to be 24 million cubic metres.
95% of the energy consumed in Ethiopia is derived from traditional energy resources. The balance is made up of electricity and oil products. Less than 4% of the population, however, is supplied with electricity. Consumption of liquid fuel products, in 1997, according to the US Department of Energy was approximately 550 000 metric tons.
The industry is regulated by the Ministry of Mines and Energy. The Ethiopian National Committee (ENEC) was established to deal with issues related to the energy sector and to assist in policy making and setting of priorities. ENEC operates through the Ministry of Mines and Energy as a planning secretariat. Energy parastatals and the agencies established for geothermal and petroleum exploration report to the Permanent Secretary of the Ministry or to the Minister directly. His Excellency, Izaddin Ali Zikeh is presently the Minister of Mines and Energy.
Petroleum legislation was promulgated in 1986.
The resource potential of petroleum and other types of energy appears to be highly promising. The Ethiopian government has selected potential petroleum development areas and these have been made open for private investment.
In these areas, some geological exploration has been carried out and there are indications of the occurrence of oil and gas. In 1974 Tenneco made a discovery in the Ogaden region of Ethiopia with estimated reserves of 2.4 billion cubic feet of natural gas.
Recent assessment of the hydrocarbon potential of Ogaden Basin was included in the study made by Alconsult International Ltd. on behalf of the Canadian International Development Agency (CIDA). The study is part of a larger study, the East Africa Regional Hydrocarbon Study which involves the participation of Ethiopia, Kenya, Madagascar, Mauritius, Mozambique, Seychelles, South Africa and Tanzania. The assessment proved that the Ogaden basin is a reasonably prospective area for petroleum resources.
This, the largest sedimentary basin, contains a commercial discovery in the form of a gas condensate field, the Calub Gas Field and is situated in the eastern part of the country. The basin has an area of 350,000 square kilometres and sedimentary thickness of up to 10,000 meters. The reserve potential of Calub gas field is proved to be 2.7 TCF and this resource is under development for production.
In order to exploit these reserves, the Ethiopian government established the Calub Gas Share Company (CGSC) with, initially, a large part of the share belonging to the government. Now with its serious interest in involving private investment in all economic sectors in the country, the government has decided to privatize 100 percent of its share and actions are being taken towards this end.
In fact, it has been reported that, in December 1999, the government of Ethiopia and Sicor of Texas, signed a preliminary agreement for a venture to produce natural gas and associated liquids. The project will be known as the Gazoil Ethiopia Project (“GEP”), and involves the acquisition by GEP of two concessions in the Calub and Hilala areas of the Ogaden basin, containing 4 trillion cubic feet of gas and 13.6 million barrels of associated liquids. GEP will also reportedly acquired approximately 95% of the Calub Gas Share Company (“CGSC”). GEP will also construct a 600-kilometer, 24-inch gas pipeline to transmit gas and associated liquids to Awash, a town 220 kilometres east of Addis Ababa.
Also in the Ogaden Basin, Ethiopia Hunt Oil, the local branch of the Canadian international, Hunt Oil Company, acquired the rights to the Genale River concession which borders Somalia and Kenya in 1989.
There is no commercial production of hydrocarbons in Ethiopia as yet.
Commercial energy is derived from imported oil which accounts for 45% of export earnings. The continued supply of oil to Ethiopia is required for the operation of the modern transport sector that exists. The transport sector consumes more than 70% of imported oil while the agriculture sector uses only 3%. Consequently changes in the petroleum fuels demand in the transport sector would have a profound impact on the oil import bill.
The waging of the two-year war in this area has had a deletrious effect on the economies of both Ethiopia and Eritrea. In June 2000, however, the two countries, signed a cessation of hostilities agreement in Algiers, brokered by the OAU. It is still too early to assess the effects of the cease-fire on the country’s economy and the oil industry.
The downstream oil industry is regulated by the Ethiopian Petroleum Corporation (EPC), which is responsible for petroleum refining and the regulation of additional supplies through the oil companies.
Until 1997, Ethiopia had one refinery which it shared with Eritrea . This was the 870 000 ton per annum Assab refinery, owned by the Eritrean government, and operated by the EPC. The refinery was a simple hydroskimming refinery which ran on Soviet Blend. In 1997, due to extremely high operating costs the Assab refinery was closed. In 1998, hostilities broke out with Eritrea which affected Ethiopia’s access to the Red Sea. All imports now come through Djibouti port.
In 1997, according to figures from the US Department of Energy, consumption of refined petroleum products in Ethiopia amounted to approximately 550,000 metric tons. These figures reflect consumption prior to the outbreak of hostilities with Eritrea and are unlikely to be representative of consumption during the war.
Product Consumption 1997
(in metric tons)
Gasoline 46,224 Jet fuel 152,820 Kerosene 0 Distillate 306,728 Residual 0 LPGs 0 Unspecified 44,517 Total 550,289
Distribution and marketing of fuels products is carried out by Shell (35.8%), Agip (22%), Total (18.8%) and Mobil (26.2%) all of whom are long established. In June 2000, Shell and AgipPetroli signed an agreement for Shell to purchase all AgipPetroli’s oil product operations in Ethiopia, together with Kenya, Uganda, Eritrea and Côte d’Ivoire. In July 2000, the fuel price in Ethiopia rose by 28.5%.
Annual petroleum tax revenue represents 84% of government indirect taxes.