The Ministry of Mines and Petroleum (MoMP)

Applying for a Petroleum License

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:

    1. The exploration period will be capped at 8 years in total
    2. The production period is 25 years, with a possible 10-year extension
    3. Income tax is set at 25%
    4. All other fiscal terms are entirely negotiable
    5. All operation costs are 100% recoverable
    6. 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:

    1. One process is followed if only one company is interested in particular block.
    2. 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.