Petroleum blocks currently open for applications and bids
Ethiopia currently has the following blocks available for petroleum investors:
Signing a Petroleum Production Sharing Agreement
Companies wishing to extract petroleum from Ethiopia are required sign a Petroleum Production Sharing Agreement (PPSA) with the Government of Ethiopia.
Six features to expect in a PPSA:
- The exploration period will be capped at 8 years in total
- The production period is 25 years, with a possible 10-year extension
- Income tax is set at 25%
- All other fiscal terms are entirely negotiable
- All operation costs are 100% recoverable
- All facilities/equipment used for petroleum exploration or production can be imported duty free. Any unused equipment can also be exported again duty free.
How to negotiate a PPSA
To improve efficiency, the MoMP does not require a company to go through a formal bidding process when only one company is interested in a particular block. So there are two possible processes for negotiating a PPSA:
- One process is followed if only one company is interested in particular block.
- The other process is followed if more than one company expresses interest in the same block.
Process 2: issuing a call for bids
If more than one company wants a license for the same block, a bid round will be floated. A formal notice will be published in the Ethiopian Herald (a national English-language newspaper).
The notice will also be posted on the Ministry’s website under Tenders and Vacancies
The bid notice will stay up at least for 45 days.
Process 2: collecting bid documents
Bid documents will be prepared and can be collected from the Ministry at the applicant’s convenience. The bid documents will clearly specify:
- When the bidding opens and closes
- How each bid will be evaluated and scored
Process 2: a model PPSA
The MoMP has a model Petroleum Production Sharing Agreement (PPSA), which can be viewed here. This model PPSA will provide guidance to investors on the expectations for the process of finalizing the agreement.
Process 2: Finalizing the agreement
The MoMP will then:
- Evaluate each bidder based on the score cards that are clearly set out in the bid documents
- Notify every bidder of the result timeously
- Arrange a signing ceremony with the winning bidder.