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 Democratic Republic of Ethiopia:
Northwest Area Study Agreement
Note: updated as of June 2009
On June 12, 2008, the Corporation entered into an exclusive Study Agreement, referred to as the Northwest Area Study Agreement, with the Ministry of Mines and Energy in Ethiopia. The Northwest Area Study Agreement covers 154,871.53 square kilometers (approximately 38,270,000 acres) in the northwestern sector of the country for an initial one year term and includes an exclusive right to negotiate an agreement or agreements to further explore for oil and natural gas on any or all of the land covered by the Northwest Area Study Agreement by obtaining an oil and natural gas concession or concessions from the Ministry of Mines. Since signing the Northwest Study Agreement, the Corporation has acquired detailed stream drainage maps and Landsat imagery over the study area. Based on that data, 13 large surface high areas have been identified.
On May 14, 2009, the Corporation announced that it had signed a Production Sharing Agreement (“PSA”) with the Ministry of Mines and Energy (the “Ministry”) in Democratic Republic of Ethiopia. The PSA covers an area of 79,345 square kilometers (approximately 19,607,000 acres) in northwest Ethiopia. Terms of the PSA include an initial three-year exploration period that includes a minimum financial commitment of $3,000,000 to drill one exploratory well and to acquire a minimum of 200 kilometers of 2D seismic. In the event the Company makes a commercial discovery, the initial percentage split of profit oil and/or gas will be 80% for Epsilon and 20% for the Ministry.
The Hosan Field, located approximately 300 kilometers west in Sudan, is the nearest commercial oil and gas field, which reportedly has estimated recoverable gas reserves of approximately 350 BCFE. Other nearby Sudanese oil and gas fields have estimated recoverable oil reserve sizes ranging from 100 to 600 MMBO. The Company’s Ethiopian acreage has technical similarities to the Sudan oil and gas fields. As compared to Sudan, the political risk in Ethiopia is drastically different, as the Ethiopian government appears to be much more stable, easy to work with and is encouraging foreign investment.
The Corporation is considering bringing in an industry partner, raising additional capital, or a combination of both to fund and share in the risk of the exploitation of this concession.
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