ESG

Africa Oil Statement on Ethiopia

Following recent media focus on Africa Oil's presence in Ethiopia, the company would like to make the following statement to clarify the actual situation on the ground.

Africa Oil has interests in several exploration concessions in Ethiopia. It is important to note that in all of the countries in which we operate, including Ethiopia, we do so within both international and national laws and follow industry best practice. We are open about our activity and have invited both Swedish journalists and investors to see our activity on the ground and how we look to manage a range of complex political and social risks. We welcome constructive discussion over how we can further develop these approaches.

Following the latest trip in February this year Nordea released a short film giving an overview of their impressions of Africa Oil's activity on the ground (https://www.youtube.com/watch?v=0QcLyQ2PgN4). A senior Corporate Governance Analyst from Folksam who was also on the trip stated:

"The investor trip gave us a good understanding of the challenges that face Africa Oil in Kenya and Ethiopia. We are glad to see that Africa Oil works in close connection with the local communities. Africa Oil show that they are determined to make the oil a blessing and not a curse for the local communities and they are also sensitive that the impact of company's presence and the finding of oil in the countries could be substantial".

Much of the recent media interest has focused around our non-operated interests in what is known as Block 8 in the Somali Regional State of Ethiopia in which we have a 30% share. A private UK based oil company, NewAge, are the operators of this block. Some media reports have linked our presence in this block to the on-going conflict between the Ethiopian government and the Ogaden National Liberation Front (ONLF), a pro-independence movement in Eastern Ethiopia.

This conflict has been going on for decades and passed through various periods of intense fighting followed by peace talks. There is no doubting that this conflict, as with many others occurring in Africa, is a tragedy for those directly involved. But again as with other African internal conflicts, the reality on the ground is often far more complicated than some media reports would like to admit. One of the best independent reports on both the history and recent developments in the conflict is the one the reputable International Crisis Group wrote that in August 2013 (http://www.crisisgroup.org/~/media/Files/africa/horn-of-africa/ethiopia-eritrea/207-ethiopia-prospects-for-peace-in-ogaden.pdf).

What is most salient from our company's perspective is that the conflict takes place hundreds of kilometers from our activities in Block 8, which is an area that is geographically and tribally distinct from the often referred to 'Ogaden'. Appendix A of the report shows the extent of the conflict area in the Somali Regional State. When compared with our own area of operation (http://www.africaoilcorp.com/s/project-maps.asp) it can be seen that the two do not over-lap. In fact the nearest violent incident reported by any group (government, ONLF, NGO) was over 250km from our location. In the seven years that we have been active in this area there have been no violent incidents associated with our presence, nor is there any evidence that Ethiopian security forces have committed abuses on or forcibly resettled any civilians in our areas of operation. On the contrary, our community related projects and employment opportunities in the area are welcomed and appreciated by the local population.

Accusations have also been laid against us that by operating in Ethiopia as a whole, and therefore being provided with armed security by the Ethiopian government, we are somehow complicit in the conflict.

In virtually all African countries, extractive companies who are there conducting legal business, are required to use security provided by the national governments should it be needed. This happens in our operations in Ethiopia as it does in Kenya, and does for other companies in places like Libya, Nigeria and Tanzania. It is unreasonable to suggest that all of these companies are therefore somehow accountable for every action undertaken by state security forces outside of their sphere of influence. Many Western governments, NGO's and the United Nations also rely on security provided by these governments to be able to conduct their business safely and securely.

In Ethiopia we use no private, armed security forces. In places where armed security is needed there is a requirement that this is provided by the Ethiopian government. Given the isolated nature of the drill site in Block 8, and its proximity to the insecure Ethiopian/Somalia border and therefore the potential threat from militant activity/terrorism from within Somalia by organizations like Al Shabaab, our partner NewAge Africa has Ethiopian soldiers stationed there. In our other operational blocks in Ethiopia such as the Rift Valley Area or South Omo Block, we need and therefore use minimal armed security, which tends to be Ethiopian police rather than soldiers.

In addition we believe strongly that the responsible, sustainable and transparentdevelopment of natural resources can lead to positive economic and socialdevelopment for countries and their citizens. In all of the countries inwhich we operate, including Ethiopia, we offer much needed employment, access to contracts for goods & services and community developmentprojects such as clean water, safe & reliable energy and health andeducational facilities.

Keith C Hill
President & CEO Africa Oil Corp.