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The downstream oil industry of Eritrea is an important sector in the country's economy as it is well-developed following government policies to encourage its development. Until it closed in August 1997, the Assab refinery supplied refined product for consumption in Eritrea and neighboring Ethiopia (who part-owned the refinery, via the Ethiopian Petroleum Corporation). Due to high operating costs the refinery was closed in 1997, with both countries agreeing to import petroleum products for at least 10 years.

Oil and gas exploration in the Red Sea off Eritrea began in the 1930s. Following independence, the country began awarding production contracts in 1995. However, as of January 2003, Eritrea had no proven reserves of crude oil or natural gas. It also has no known reserves of coal. As a result, the country, as of 2001, has had no output of oil, natural gas or coal. Petroleum imports and consumption were estimated each at 4,590 barrels per day (730 m3/d) in 2002. In 1997, due to high costs, Eritrea and Ethiopia agreed to shut down their joint operations at the petroleum refinery at Assab and import refined petroleum products. The refinery had a capacity of 18,000 barrels per day (2,900 m3/d). In 2000 an estimated 3.2 to 3.3 million barrels per day (510×103 to 520×103 m3/d) of oil were shipped through the Bab el-Mandeb, a narrow waterway between Eritrea, Yemen, and Djibouti that connects the Gulf of Aden with the Red Sea.

Hydrocarbon exploration, primarily offshore in the Red Sea, began in the 1960's when Eritrea was still federated with Ethiopia. In 1995, Eritrea signed a production sharing contract (PSC) with U.S.-based Anadarko Petroleum (Anadarko) for the offshore Zula Block. Anadarko signed a second PSC for the offshore Edd Block, located south of the Zula Block, in September 1997. Anadarko announced, in December 1997, that it had reached an agreement with ENI/Agip to swap interests in exploration acreage. Anadarko received a 25% interest in a Tunisian block operated by Agip, and Agip received a 30% share in the 6.7-million acre Zula Block and 30% interest in the Edd Block. Burlington Resources, a U.S.-based independent, later joined the consortium by acquiring a 20% interest in both acreages. Anadarko's first two exploration wells, both drilled on the Zula Block, were unsuccessful. In January 1999, a third dry well, Edd-1 on the Edd Block, was drilled. Citing the disappointing exploration results, Anadarko and its partners ceased exploration activities and relinquished their rights to the offshore blocks.

Marketing and distribution of petroleum products is performed by ExxonMobil, Shell and Total.

Petroleum Law & Legislation

The oil and gas industry in Eritrea is represented by the Ministry of Energy and Mines that acts as a regulator and grants oil and gas operating and exploration licenses. The Model contract consists of a Production Sharing Contract together with a detailed accounting procedure and a participation agreement.

The Eritrean Government has promulgated the following Laws and Regulations:

  • Proclamation No 40/1993 - A Proclamation to govern Petroleum Operations
  • Proclamation No 41/1993 - A Proclamation to provide payment of Income Tax on Petroleum Operations
  • Legal Notice No 24/1995 - Regulation on Petroleum Operations.

Oil & Gas Companies

The major key players include:

  • Andarko Petroleum Corporation-Eritrea
  • ExxonMobil
  • Shell
  • Total

Key Figures

  • Oil production: 0 bbl/day(2008)
  • Oil Consumption: 5,000 bbl/day(2008)
  • Oil Exports: 0 bbl/day(2007)
  • Oil Imports: 4,790 bbl/day(2007)
  • Oil Proved Reserves:0 bbl (2009)
  • Natural Gas Production: 0 cu m(2008)
  • Natural Gas Consumption: 0 cu m (2008)
  • Natural Gas Exports: 0 cu m (2008)
  • Natural Gas Imports: 0 cu m (2008)
  • Natural Gas Proved reserves: 0 cu m(2009)

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