Eritrea: Oil & Gas Explorations of The Eritrean Red Sea coast

Michael Arustamov is the Managing Director of Extol Energy Services, a consultancy company focused on political risk analysis, business intelligence, IBD Strategy & Negotiations and C-Suite Advisory.

The Eritrean’s Red Sea coast is open for O&G explorations, according to the country’s Ministry of Energy & Mines. Eritrean’s hydrocarbon exploration activities have stayed dormant for nearly 30 years due to ongoing conflict for independence with Ethiopia.

However, recent security improvements and successful E&P activities elsewhere in East Africa have convinced the government to step up promotion of its untapped O&G resources in the Red Sea area.

Eritrean’s PSA and contract model was last updated in 2000 to make its pre-salt prospects attractive to IOC’s. According to the government, the PSA terms are negotiable and won’t require a licensing round.

One would have to negotiate a MOU and work program before signing a PSA. The profit oil is split and negotiable.

ENI, Anadarko, Perenco, and CMS O&G have all conducted G&G work in the country, but largely abandoned its efforts over the last 15-20 years.

Exxon Mobil, Shell and Total are involved in the marketing and distribution of petroleum products in the country. Today, exploration of the Eritrean Red Sea is pretty much up for grabs and remains largely unexplored.

Eritrea lacks O&G infrastructure and export potentials as government’s past efforts largely concentrated on mining sector, dominated by Canadian, Australian and Asian companies, to bankroll expenditures.

Security improvements, mostly involved its relationship with Ethiopia, coupled with new technologies in development of unconventional offshore reserves, reignited government’s interest to promote previously abandoned exploration activities. As such, it compiled volumes of technical information of the Red Sea prospects to help investors assess the area’s potentials.

The government recently began courting foreign companies at regional industry venues.  It also hosted a slew of official European delegations to promote investments.