Ethiopia: The mining and energy sector.

Ethiopia: The mining and energy sector.

The Reporter (http://africannewsanalysis.blogspot.)

24 November 2007

In the past, the mining and energy sector in Ethiopia could hardly make meaningful contribution to the country's economic development. Under the command economy system, the country was unable to exploit the mineral and energy resources.
Evidently multifarious changes have been made in this regard following the government change in 1991 as the country started to peruse free market economy. The sector has been freed from a centralized system and become open to private investors, which helped it to further development.

The Ministry of Mines and Energy (MME) has now focused on gathering basic data on minerals, preparing a geological map to find mineral ores sites and providing investors and the public with the outcomes of the findings. The government economic policy and principles have been adopted in a manner that they enable the country to effectively exploit its mineral and energy resources.

The MME, along with other bodies working on minerals and other related activities, is coordinatingand facilitating conditions to attract investors.

The ministry has been striving to create an investment-friendly environment to investors so that they would be able to produce market-oriented minerals which help secure more foreign currency. As exporting minerals, particularly gold, illegally to other countries through border territories can adversely affect the economy, the ministry has laid stress on averting this devastating effect.

In this regard, measures like encouraging traditional gold extractors, providing them with financial as well as technical assistance and organizing experience-sharing forums are being taken.

Currently some 48 companies are licensed to execute projects with a combined capital of 600 mm birr. The projects would open job opportunities for 5,000 citizens. The government has revised mining and petroleum exploration laws. Tax holidays, income tax discounts, allowing investors to import untaxed machineries are among the measures taken to attract investors and to motivate them to implement their projects competently.

MME is closely working with the federal government offices, the state bureau, and various public offices and enterprises with a special emphasis on minerals that are traditionally produced and susceptible to illegal export. It has also been offering capacity building training to producers of gold in particular. The measure taken in Odo Shakiso to change the traditional mode of mineral exploration to a relatively modern and legal one is a case in point. As a result, the amount of gold producers bring to the market is now on the rise as they are getting much benefit out of it.

With regard to petroleum exploration activities various companies are making huge investments in this sector. The Malaysian oil and gas company, Petronas, has been prospecting for oil in the Gambella and Ogaden basins. Petronas has also reached an agreement with MME to develop the natural gas reserves in Calub and Hilala localities in the Ogaden basin.

Another Malaysian company, Pexco, is to start petroleum exploration in Fer Fer and Afder zones found in the Ogaden basin. South-West Energy, a company licensed in Hong Kong, is engaged in an oil exploration project in Degehabur zone in the Ogaden basin. A Swedish petroleum company called Lundin Petroleum is about to start exploration work in the Ogaden.

Afar Exploration, an American company which signed an agreement with MME to prospect for oil in the Afar Regional State, is analyzing geological data. A British company called White Nile is also conducting geological and geophysical studies in the Omo Valley.

With regard to electric power generation, MME is exerting at most efforts to electrify all parts of the country through the Ethiopian Electric Power Corporation (EEPCO). The country now has 800 MW power and EEPCO plans to generate 3,200 MW after three years when hydro-power projects such as Gilgel Gibe II go operational. Ethiopia has now finalized preparations to create Ethio-Sudan, Ethio-Kenya and Ethio-Djibouti power networks for the benefit of all. The country has the potential to generate 45,000 MW, which EEPCO believes would enable the country to export power to neighbouring countries.

Despite its huge potential the country has not yet effectively exploited this untapped energy resource. As a result only 22 % of the total population has access to electric power. EEPCO is implementing a universal electric city access program with a view to providing adequate and equitable power in rural areas.
Under a five-year program, various activities are being carried out to scale up power coverage to 50 % and to raise the number of customers to 2.6 mm from the current 1.04 mm. EEPCO also plans to increase the number of towns which have access to electricity from 1,658 to 6,000.

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