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Reporter, Ethiopia Saturday, 09 August 2008 Kaleyesus Bekele -- To pay USD 200,000 signing bonus Falcon Petroleum Ltd., a company registered in Cyprus and based in the UK, has acquired three oil exploration blocks with a total area of 25,875 sq km in the Abay sedimentary basin found in the Amhara Regional State. After a series of negotiations held between officials of Falcon and the Ethiopian Ministry of Mines and Energy (MME) the latter accepted the proposal. The ministry last month forwarded the petroleum exploration and development license to the Council of Ministers for endorsement. Accordingly, the council of Ministers approved the license two weeks ago. Alemayehu Tegenu, Minister of MME, and Mr Radwan Hadi, deputy managing director of Falcon, on Thursday signed the petroleum exploration and development agreement and production sharing agreement (PSA) at the Sheraton Addis. The agreements will enable Falcon to prospect and develop petroleum resources in the exploration areas Found in Woreilu locality, in northern Ethiopia, in the Abay Basin. The Abay Basin is one of the five sedimentary basins believed to be oil prospective in Ethiopia. The Woreilu locality has been for long known for oil seepage. Minister Alemayehu told Reporters that the exploration period will be four years, adding that the petroleum production period was for the next 25 years. "The company will be fully responsible to cover all costs necessary for all petroleum operations," Alemayehu said. Falcon is the first company to engage in oil exploration activity in the Abay Basin. A local company called K&S and MME have been jointly conducting geological studies in the Woreilu locality, where there has been continuous oil seepage for the past many years. K&S, which brought Falcon to Ethiopia, has been collecting geological data in collaboration with falcon for the past one year in Woreilu. K& S and Falcon have conducted gravity survey in the exploration area. Mr Radwan said the oil seepage and the results of the survey were encouraging. However, he said the area was unexplored, adding that there was limited available data collected from the locality. Radwan told The Reporter that the Abay sedimentary basin was covered by thick basalt rock, adding that it was difficult to conduct seismic survey and drill exploration wells in such areas. However, he said his company would bring new technologies and equipment suitable to collect seismic data and drill exploration wells in areas covered by basalt rock. Falcon has allocated an initial capital of 15 million dollars for the Woreilu oil exploration project. A senior official with MME told The Reporter that Falcon agreed to pay 200,000 dollars signing bonus to the ministry in the coming 30 days. Established in 2005, Falcon is engaged in oil exploration projects in Mali, Pakistan and west Siberia. Dr Tilahun Mamo, a geophysicist at the Addis Ababa University, told The Reporter that areas covered by volcanic rocks usually discourage oil companies from engaging in exploration work. Dr Tilahun, who conducted a study in Woreilu, said that exploration work in areas covered by volcanic rocks was challenging, adding that it requires more capital. However, he said it was possible to discover what nature stores in the sedimentary basin found under the volcanic rock. "It is possible to explore such areas by applying new technologies," he commented. Dr Tilahun said that the thickness of the basalt rock ranges from 900 to 2,000 meters. During his study Tilahun identified a sedimentary basin beneath the basalt rock. The basin has an average thickness of 5,000 meters. Dr Tilahun believes that there was a crude oil reserve in the basin. "There is the source rock that generates oil. There is the reservoir, and cap rock that you need to have to discover oil. The heat and pressure emanating from the basalt rock had matured the sedimentary rocks. I think the oil seepage is coming from the sedimentary basin," he said "I have no doubt about the existence of oil reserve in Ethiopia," he concluded. Ogaden, Gambella, Omo, Abay and Mekelle are the five basins in Ethiopia. For the past many years companies focus was on the historic Ogaden basin. The history of oil exploration in the Ogaden basin dates back to the 1950s. Dozens of foreign oil companies have prospected for oil in the Ogaden. In 1973 an American company Tenneco discovered natural gas reserves in Calub and Hillala localities. In recent years there has been a growing interest in other areas like Gambells, Omo and Afar regions. “We will continue to redouble our effort to attract oil companies to explore other regions,” Alemayehu said. At present, there are six companies engaged in oil exploration in Ethiopia and Falcon is the seventh company to sign PSA.