ADDIS ABABA, Ethiopia, Oct. 25 (UPI) - Amid East Africa's oil and gas boom, the more adventurous oilmen are starting to gravitate toward the vast Ogaden desert region of Ethiopia, where drilling activity has been sparse since rebels attacked an exploration team in 2007, killing nine Chinese and 65 Ethiopians.
Oilmen believe Ethiopia lies on the same oil-bearing strata as the massive discovery in Kenya by British-based Tullow Oil (OTO:TUWLF
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) in early 2012.
Initial estimates are that Ethiopia has oil reserves of around 2.7 billion barrels.
That's a modest enough total in global terms, but it's a potential bonanza for an impoverished state like Ethiopia, which has been land-locked since Eritrea broke away to form an independent state on the Red Sea in 1991 after a 30-year separatist war.
The Horn of Africa country has not produced any oil in commercial quantities since its first oil seep was reported in 1860.
There was some exploration 1915, which continued fitfully until the 1940s without any serious finds.
Gas was discovered in 1972, but the wars and insurgencies prevented development until the recent strikes in Kenya, Tanzania and Mozambique to the south.
Tullow is currently drilling in western Ethiopia on what is considered an extension of its Kenya concessions, deemed to be part of East Africa's Tertiary Rift that also embraces Uganda and its rich Lake Albert field.
Other companies are gearing up to follow Tullow and its partner, the Africa Oil Corp. (TSX:V.AOI
, Stock Forum
), based in Canada, into the Ogaden, a Cold War battleground that remains contested between Ethiopia and troubled neighbor Somalia.
"Exploration in the Ogaden Basin, as well as newer activity in the Omo and Gambella basins, will continue to face challenges due to relatively remote operating environments these areas represent," Oxford Analytica observed.
Unlike in most countries where oilmen go exploring, the government in Addis Ababa is not keen at all on promoting expectations of vast oil and gas wealth, for now anyway.
It's downplayed reports that Tullow, a trailblazer across East Africa, has struck oil in the southwestern Omo Basin - apparently to avoid stirring political unrest and aggravate territorial disputes, both internally and with its neighbors.
Ethiopia's longtime strongman, Prime Minister Meles Zenawi, who died in 2012, "was famously skeptical of the benefits of hydrocarbons, a policy stance which - rhetorically at least - his successor, Hailemariam Desalegn has maintained," Oxford Analytics noted.
Major oil or gas discoveries could transform the country's economy, which is totally reliant on energy imports.
Tullow too has been circumspect about its Ogaden operations because of exaggerated expectations triggered by the major strikes elsewhere in East Africa, particularly the large gas fields found in the Indian Ocean off Tanzania and Mozambique.
The Omo region, says James Phillips, Africa Oil vice president for business development, "is frankly the end of the Earth. It hasn't had any attention from oil and gas exploration ever."
The Ogaden is a rough neighborhood, and has been a battleground in several conflicts, including Eritreans' war of independence against Ethiopian rule that ended in Eritrea breaking away, cutting Ethiopia off from the Red Sea.
Between May 1998 and June 2000, the two states, among the world's poorest countries, fought a brutal but inconclusive border war in which, by conservative count, 70,000 people were killed. The disputed border remains tense.
In early 2013, rebels of the Ogaden National Liberation Front - which took up arms in 1994 and was responsible for the April 2007 massacre that eventually drove out Malaysia's Petronas (GREY:PNAGF
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) - warned Africa Oil Corp. to halt exploration.
It warned the company not to pay "blood money" to Addis Ababa and declared "the Ogaden is a battle zone that is not safe for an oil company to operate in."
Africa Oil went on drilling and signed a new agreement with Addis Ababa that gives it exploration rights over 35,000 square miles in the Ogaden and Omo regions.
SouthWest Energy, an Ethiopian exploration outfit, has rights on 17,600 square miles of the Jijiga Basin on Ethiopia's eastern border with Somalia.
It estimates that region, where the 2007 massacre occurred, holds 1.5 billion-3 billion barrels of oil.
The prospects likely extend to Eritrea, which lies at the southern end of the Red Sea. It has the geological characteristics of a major hydrocarbon bonanza, particularly offshore.