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Gov’t adjusts natural gas estimates to 21.3 billion cubic meters

The federal government is undertaking a feasibility study for lofty ambitions to see the installation of the country’s first fertilizer factory with a production capacity of 2.5 million metric tons of urea annually.

A 10-month report recently published by the Ministry of Planning and Development reveals the six-month study will analyze the production of urea using natural gas reserves in the Somali region.

The report also indicates that Poly GCL, a joint venture between the Chinese Poly Group Corporation and Hong Kong’s Golden Concord Group, has embarked on the first phase of a natural gas development project in the region, which holds up to 198 billion cubic meters of the fossil fuel.

Officials expect to see up to 182,000 cubic meters of natural gas produced each day upon conclusion of the phase.

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Poly GCL recently obtained a natural gas exploration and production concession from the federal government for the second time in a decade after officials moved to reverse a revocation first enacted by Takele Uma, former minister of Mines, two years ago. The firm had initially lost its licensing as a result of production delays.

Despite conducting exploration works and pilot production trials in the Calub and Hilala drill areas, the company failed to begin natural gas production before 2017 as was stipulated in the initial agreement with the federal government signed in 2013.

A report from the Ministry of Mines published a few weeks ago reveals that following negotiations with the Chinese government and ‘thorough’ due diligence on Poly GCL, the federal government has decided to allow the firm to resume its work in the Somali region.

“We have conducted repeated negotiations and consultations with the company that was previously awarded the contract to develop the natural gas in the eastern part of the country. We conducted the same discussions with its country of origin. We have deployed teams and several stakeholders to conduct in-depth and thorough due diligence on the company. The company and its country of origin have presented to us all evidence and confirmation. Therefore, we have agreed to allow the company to resume the natural gas development work,” reads the report.

The document urges that natural gas production should start as soon as possible in order to initiate a fertilizer production project that has been touted as a mega-project for several years now.

In 2022, Netherland, Sewell & Associates, an American firm specializing in petroleum resource analysis, certified Ethiopia as having seven trillion cubic feet of natural gas in Ogaden, Somali region.

However, a few weeks ago, state media Ethiopian Herald cited Million Matiwos, a state minister of Mines, as saying Ethiopia has confirmed 21.3 billion cubic meters of natural gas reserves across 19 wells. These include locations in Ogaden, Mekelle, Metemma, South Omo, and Gambella, according to the Ministry.

Industry insiders say the contrasting figures between the government’s reports and that of the American firm are likely a ploy to attract investors. Sources say the government is downplaying the size of the natural reserves to prevent “discouraging foreign investors’ appetite” with higher figures, which would call for higher investment valuations.

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