AFRICANGLOBE – SouthWest Energy of Ethiopia aims to be the latest company to profit from east Africa’s oil and gas exploration boom after securing encouraging third-party estimates for the amount of oil contained in its licences across the country.
Tewodros Ashenafi, founder and chief executive of SouthWest, said that he expects the release on Monday this week of a report gauging prospective reserves to drive private investor support for the drilling campaign in the Jijiga Basin region.
The company, based in Addis Ababa, has already raised about $50m, largely from wealthy individuals to invest in acquiring blocks and seismic data in the country.
It is aiming to raise another $100m by May to help fund a drilling programme of three exploration wells at blocks held near the Somaliland border on the Horn of Africa from later this year.
SouthWest also holds blocks in the west of Ethiopia, close to oil finds in South Sudan and north of blocks held by FTSE 100 constituent Tullow Oil that, along with Canadian partner Africa Oil, has embarked on a drilling campaign this spring.
Africa Oil, which sold down interests in some of its western blocks to Tullow in 2010, also holds blocks in eastern Ethiopia and Puntland, an autonomous region of northern Somalia.
Mr Ashenafi, whose interests also include developing a bottled mineral water venture with the backing of SABMiller, conceded that final proof of commercial oil and gas production potential in Ethiopia remained some way off.
But he argued that the success of other explorers, both on land and off the shores of other east African countries in recent years, would attract institutional money to back drilling activity in landlocked Ethiopia.
“The key point is that private equity is out there and looking for opportunities such as ours.”
In spite of the cash squeeze facing many junior listed explorers, Mr Ashenafi argued: ”QE3 [quantitative monetary easing] is in full force and there’s a lot of liquidity out there and people trying to work out where to put money.”
He added: “Ethiopia is very hot. We’ve had interest move from Mozambique to Kenya, Uganda and Kenya – next is Ethiopia.”
A combination of coups, civil wars and yo-yoing global oil price cycles since a return to a more stable political situation has left the country underexplored, he argued.
The overthrow of Emperor Haile Selassie in 1974 by the Soviet-backed regime of Mengistu Haile Mariam in effect prevented any exploration of hydrocarbons until the 1990s when low oil and gas prices then limited interest in exploration by companies in the region, he said.
The so-called competent persons report compiled by energy services company Senergy and to be published on Monday, states that the SouthWest’s blocks may hold 1.59bn barrels of prospective resources, with a highest estimate of 2.9bn.
This estimate is based on its licences for 24 potential oil and gas traps across nearly 370,000 square kilometres that Senergy described as “frontier but potentially high reward oil exploration acreage”.
The release of the report on potential resources was welcomed by Sinkinesh Ejigu, Ethiopia’s minister of mines, who described it as “an important next step in the quest to find onshore oil in our country”.
Included on SouthWest’s advisory board are Sir John Bond, chairman of Xstrata, Simon Murray, chairman of Glencore and Malloch-Brown, who served for two years as UK minister of state in the Foreign and Commonwealth Office of Gordon Brown’s Labour government with responsibility for Africa, Asia and the UN.