The company needs USD 4.2 billion for the total project development
The Ministry of Mines issued a final ultimatum to the Chinese company, POLY GCL, demanding the company registers 30 percent of its total investment capital at the National Bank of Ethiopia (NBE) before June 30, 2022 or terminate the Petroleum Production Sharing Agreement (PPSA) signed in November 2013.
The Ministry handed out the final ultimatum on March 22, 2022, a few hours after the consultative meeting was held on the same day with higher officials of Poly GCL.
During the meeting, the Ministry and officials representing the company, deliberated on two main agendas; focusing on the financing of the project in general and on contractual obligations of the company, a higher official at the Ministry told The Reporter with conditions of anonymity.
From the consultative meeting, the Ministry concluded that POLY GCL does not have the required financial capabilities to implement the project, the official said.
The Ministry then decided to take corrective measures to rectify the company’s failures in a way that works for the government and the people of Ethiopia to reap the economic benefits of the project quickly, the official added.
According to the official, the company needs USD 4.2 billion for the total project development. However, it does not have the investment capital yet.
The company does not have the financial capacity even to fulfil its contractual obligation of contributing USD 50,000 per year for Community Development for the past five years, the official said.
This prompted the Mining Minister, Takele Uma to issue a final ultimatum demanding the company to register 30 percent of the total investment capital before June 30th, the source said.
In the letter, which The Reporter has also seen, was signed by Takele Uma, addressing the contentious issues with the company and setting stringent terms to be met by the company before the expiration of the deadline.
In his letter, Takele required POLY GCL to register the minimum equity capital, which is about 30 percent of the USD 4.2 billion needed for the total investment, and to produce a debt financing agreement for the remaining 70 percent of the investment capital.
“POLY-GCL must register the equity capital at the National Bank of Ethiopia on or before June, 30, 2022. Additionally, the debit financing status for the remaining amount should be communicated with the Ministry by the above date,” Takele warned the company.
“Failure to show the company’s financial capability, and failure to register 30 percent of the equity capital in particular, constitutes terminable event within the meaning of Article 2.5.2 of PPSAs and will result in the termination of the license agreement, after the expiration of the deadline set for the 30th of June 2022, without a need for further notice,” Takele notified the company in his letter issued on March 22.
Takele also urged the company to settle the USD 1.7 million for the Community Development in full no later than May, 24, 2022.
“Your assurance of financial capacity and clear disclosure of financial arrangement stated above is a pillar to convince the Ministry and the Government of Ethiopia to provide the National Natural gas domestic consumption plan for fertilizer,” Takele said.
The Mining Minister handed out the ultimatum to POLY GCL in the same week it signed an agreement with a US company to study oil and natural gas reserves in the Somali region, where POLY GCL’s project site is located.
POLY-GCL Petroleum is a joint venture of state-owned China POLY Group Corporation and Hong Kong-based, Golden Concord Group, which could not immediately be reached for comment as of press time.
The government of Ethiopia awarded POLY GCL for the production of the Calub and Hilala gas fields, which have deposits of 4.7 trillion cubic feet of gas and 13.6 million barrels of associated liquids, both discovered in the 1970s but not yet exploited.
