Ethiopia signs 4-year deal with Petronas

By Anthony Mitchell: July 26, 2005

The agreement, signed Monday, could be extended by another four years and there is an option for a 25-year production deal if oil is found, said Abiy Hunegnaw, head of petroleum operations at the Mines Ministry.

Petronas has to invest at least US$15 million (euro12.4 million) in startup funding and Ethiopia will receive unspecified royalties if oil is found in the 93,000-square kilometer (35,907-square mile) area in the eastern Ethiopia region of Somali, Abiy said.

The Ogaden National Liberation Front said in a statement received Tuesday, but dated Sunday, that as long as the people of the region, which also is known as Ogaden, are not allowed to decide what kind of government they want, "the exploitation of natural resources in Ogaden for the benefit of the Ethiopian regime or any foreign firm will not be tolerated."

Abiy dismissed the warning and said the exploration would benefit the Somali region's people, one of the poorest in Ethiopia.

"The world no longer tolerates terrorist groups," said Abiy.

Petronas officials were not immediately available for comment.

Since the early 1990s, the Ogaden National Liberation Front has been fighting for an independent state for ethnic Somalis, who are the majority in the region, which is the size of Britain and has a population of about 4 million people. It makes occasional hit-and-run attacks against government troops.

Petronas and the cash-strapped government of Ethiopia also signed a deal in 2003 giving the company exclusive rights to explore and develop a 15,000-square kilometers (5,792-square mile) area in the southwestern region of Gambella that borders Sudan.

State broadcasters have reported that the company will begin drilling there next year.